Auctioning concessions for private roads. Transport infrastructure is traditionally provided and financed by public governments. It has been a highly regulated sector and hence price setting has been determined by political objectives rather than the market. However, private involvement in financing and operation of roads has gained much interest, mainly due to increasing public budgetary deficits and inefficient regulation by the government. Public institutions are nowadays very much interested in ways to include private experience and funds into road transportation issues, and private toll roads are seriously treated as an alternative to public free-access road infrastructure. Nevertheless, complete private provision without governmental control is only rarely considered. This paper analyses capacity choice and toll setting by private investors in a competitive bidding framework organised by the government. We develop a two-link network simulation model with an untolled alternative to determine relative efficiency effects, and analyse rules for the government to organise the bidding process such that a more desired (welfare optimal) outcome is achieved. Our results show that depending on the design of the auction its outcomes may vary from being welfare reducing to achieving the maximum possible welfare gains. (Author/publisher)
Samenvatting