This paper analyses indirect effects that arise from network interdependence. If profitability of a new, tolled link depends on extraction of user surpluses previously enjoyed on the earlier network, addition of the new link can be welfare-negative. Thus the profit test cannot displace cost-benefit analysis.
Topic: 14.1 Highways
An equilibrium model is used to explore the relationship between traffic forecasts and highway investment benefits under changes in variables such as car ownership, economic activity and travel costs. Failure to incorporate the effects of cost changes may lead to substantial overestimation of both traffic volumes and measures of user benefits over the lifetime of a project. The implications for conventional methods of highway appraisal are considered.
This paper analyses optimal pricing of rail infrastructure use, and optimality conditions for rail and road investment. It is demonstrated that under most circumstances rail charges should be below marginal costs and that investments in both modes should be reduced.
The problem of setting a socially relevant ranking of investment projects in the presence of budgetary restrictions and incomplete information is examined. An actual road investment programme, settled under these conditions, is analysed. Observed behaviour is shown to be only partially compatible with social welfare maximising principles.
A projected road interchange at bredden did not show a rate of return high enough for inclusion in the programme of the Swedish National Road Administration. After negotiations it was jointly funded by the Administration and local firms. This paper examines the conditions under which voluntary funding may be accepted and the various policies available.
The authors use a simplified model to analyse the circumstances in which fixed demand estimation will severely over- or under-estimate the equilibrium benefit of highway schemes. In view of the importance of a correct estimate of any traffic likely to be estimated, they suggest it would be appropriate to perform as a matter of course a sensitivity analysis of the benefit measures to variations in predicted response.
The treatment of road investment differs from previous accounts by redefining the production function for road services. The paper then critically examines the belief that the provision of road service capacity is subject to pronounced indivisibilities.
This article criticises the bases on which trunk road schemes are evaluated by the Department of the Environment. traffic forecasts should relate car ownership to household characteristics rather than to the individual; small time savings should be ignored; by-passes should be judged on their value to the environment and not only on financial costs/benefits.
A comment on the article by P W Abelson and A D J Flowerdew published in this Journal in May 1975.
A relief road for Wellington, Somerset, opened in 1971, was built to a very modest standard because it was to be superseded by the extension of the M5 motorway. This reappraisal shows that the low-cost road has been successful; Wellington has been improved by the diversion of traffic.