Private roads, competition, and incentives to adopt time-based congestion tolling

This paper investigates whether time-based congestion tolling is profitable for a private toll road operator when competing for traffic with another road. Despite the fact that congestion tolling boosts revenue by reducing congestion delay it can be unprofitable if it induces a private or public toll road rival to reduce its toll severely. The size of the rival's response depends on the price elasticity of travel demand and on whether the rival also employs congestion tolling. In a private duopoly adoption may be unilaterally profitable, but parallel adoption unprofitable, so that a Prisoner's Dilemma obtains. (C) 2002 Elsevier Science (USA). All rights reserved.