Privatizing highways in the United States (original) (raw)
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Privatizing Roads: A New Method for Auctioning Highways
World Bank …, 1997
This Note argues that many of the problems that have plagued highway privatization stem from the combined effects of special features of the highway business and the type of contracts-fixed term franchises-that have typically been used. The Note proposes a new mechanism, the leastpresent-value-of-revenue (LPVR) auction, that corrects some of the shortcomings of the fixed term franchise. The new mechanism endogenously adjusts the duration of the franchise to the realization of demand: the term lengthens if traffic grows more slowly than expected and shortens if it grows more rapidly than expected.
Privatizing Toll Roads: A Public-Private Partnership
2000
Introduction Toll Collection Privatization: The OOCEA Experience Privatization Transfer: Theory and Practice OOCEA: The Privatization Decision Request for Proposal: Theory Development and Practical Application Bidder Responses to the 266 RFP: The Technical Proposal Bidder Responses to the 266 RFP: The Pricing Proposals The Transition Stage: Contract, Mobilization, and Phasing Contract Management and Renewal Assessment and Conclusion Bibliography Glossary Index
Number of Bidders and the Winner's Curse in Toll Road Concessions: An Empirical Analysis
2006
In this paper, we empirically assess the effects of the winner’s curse in auctions for road concession contracts. Such auctions are private- and common-value auctions, and they are on concession contracts which are incomplete contracts prone to pervasive renegotiations (Guasch 2004, Engel 2005, Athias-Saussier 2006). We address three questions in turn. First, we investigate the overall effects of the winner’s curse on bidding behaviour in such auctions. Second, we examine the effects of the winner’s curse on contract auctions with differing levels of common-value components. Third, we investigate how the winner’s curse affects bidding behaviour in such auctions when we account for the possibility for bidders to renegotiate. Using a unique dataset of 37 road concessions worldwide, we show that the winner’s curse effect is particularly strong in toll road concession contract auctions, implying the prevalence of common value components over private value components in such auctions. Th...
Transportation Research Part B: Methodological, 2016
In private toll roads, some elements of the private operator's performance are noncontractible. As a result, the government cannot motivate the private operator to improve them through a formal contract but through a self-enforcing contract that both parties are unwilling to deviate unilaterally. In this paper, we use noncontractible service quality to capture these performance elements. By employing a relational contract approach, we aim to investigate the optimal subsidy plan to provide incentives for quality improvement. We show that government subsidy is feasible in quality improvement when the discount factor is sufficiently high and marginal cost of public funds is sufficiently small. Under feasible government subsidy, we have demonstrated the optimal subsidy plans in different scenarios. Moreover, some comparative statics are presented. Based on the derived subsidy plans, we further investigate the optimal toll price. We find that the optimal toll price generates zero surplus for the private operator and positive surplus for consumers. We then make two extensions of our model to re-investigate the government's optimal decisions on subsidy plan and toll price when her decision sequence is changed and when government compensation is present upon termination of the relationship. Some implications for practice have been derived from our model results.
Transport Reviews, 2009
Recent concessions in France and in the USA have resulted in a dramatic difference in the valuation placed on the toll roads; the price paid by the investors in France was 12 times current cash flow whereas investors paid 60 times current cash flow for US toll roads. In this paper, we explore two questions: what accounts for the difference in these multiples? and what are the implications with respect to the public interest? Our analysis illustrates how structural and procedural decisions made by the public owner affect the concession price. Further, the terms of the concession have direct consequences that are enjoyed or borne by the various stakeholders of the toll road.
Private toll roads: a dynamic equilibrium analysis
1997
In recent years there has been a surge of interest in private toll roads as an alternative to public free-access road infrastructure. Private toll roads have gained favour for a variety of reasons, including their potential to alleviate traffic congestion, shrinking public funds for road construction and maintenance, and growing acceptance of the user-pay principle. This paper takes the profitability of private toll roads as given, and focuses on their allocative efficiency. The model features one origin and one destination linked by two parallel routes that can differ in capacity and free-flow travel time. Congestion takes the form of queueing. Individuals decide whether to drive, and if so on which route and at what time. Three private ownership regimes are considered: a private road on one route and free access on the other route, competing private roads, and a mixed duopoly with a private road competing with a public toll road. The efficiency gain (measured by social surplus) in each regime is measured relative to the efficiency gain derived from applying first-best optimal tolls on both routes. Private toll roads are generally found to enhance efficiency. The efficiency gain is greater when tolls are varied over time to eliminate queueing, when competing routes are also tolled, when no private road has a dominant fraction of total capacity, and when a private road does not suffer a significant travel time disadvantage. Paradoxically, a mixed duopoly can be less efficient than a private duopoly. Price leadership by a public toll road operator avoids this possibility, although leadership typically yields little efficiency gain.
Regulating concessions of toll motorways: An empirical study on fixed vs. variable term contracts
Transportation Research Part A-policy and Practice, 2009
Recent theoretical developments on concession contracts for long term infrastructure projects under uncertain demand show the benefits of allowing for flexible term contracts rather than fixing a rigid term. This study presents a simulation to compare both alternatives by using real data from the oldest Spanish toll motorways. For this purpose, we analyze how well the flexible term would have performed instead of the fixed length actually established. Our results show a huge reduction of the term of concession that would have dramatically decreased the firm's benefits and the user's overpayment due to the internalization of an unexpected traffic increase.
Toll Caps in Privatized Road Networks
2018
We consider a network pricing game on a parallel network with congestion effects in which link owners set tolls for travel so as to maximize profit. A central authority is able to regulate this competition by means of a (uniform) price cap. The first question we want to answer is how such a cap should be designed in order to minimize the total congestion. We provide an algorithm that finds an optimal price cap for networks with affine latency functions and a full support Wardrop equilibrium. Second, we consider the induced network performance at an optimal price cap. We show that for two link networks with affine latency functions, the congestion costs at the optimal price cap are at most 8/7 times the optimal congestion costs. For more general latency functions, this bound goes up to 2 under the assumption that an uncapped Nash equilibrium exists. However, in general such an equilibrium need not exist and this can be used to show that optimal price caps can induce arbitrarily ineff...