Competition in Transportation Modes and the Provision of Infrastructure Services

Conrad, Klaus

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URN: urn:nbn:de:bsz:180-madoc-10466
Document Type: Working paper
Year of publication: 1999
The title of a journal, publication series: Discussion Papers / Institut für Volkswirtschaftslehre und Statistik
Volume: 564
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Institut für Volkswirtschaftslehre und Statistik > Discussion Papers
Subject: 330 Economics
Classification: JEL: H54 L13 L92 R41 ,
Subject headings (SWD): Infrastruktur , Preiswettbewerb , Transport , Verkehrsstau
Abstract: The purpose of this paper is to model competition in freight transport and to work out the role of the government in providing infrastructure for the competitors. Freight transport could in principle be provided by the firm itself by using firm-owned trucks or transportation services could be outsourced by purchasing these services from rail and/or truck transport firms. We link production in the rest of the economy to transport demand, provided by two competing modes of transport. Since congestion is an increasing cost component in densely populated countries, we develop an index of congestion which can be controlled by investing in highway infrastructure. Given infrastructure, a fuel tax and the stock of vehicles, we first derive the conditional demand functions of the economy for truck and rail services. The two transport firms know these demand functions and compete in prices. We then propose a transportation policy which chooses two types of infrastructure, highways and the railway system, and a fuel tax in order to maximize welfare. The economic aspects for an optimal provision of the two types of infrastructure can be expressed by a set of unknown elasticities which measure the impact of infrastructure services on price and quantity variables in transport industries. With time series data for the German economy we measure these impacts on prices in the rail and truck industries, on the volume of transport, on congestion, and on the utilization of the stock of transportation equipment.
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