Highway Franchising: Pitfalls and Opportunities

Eduardo M. R. A. Engel · Ronald D. Fischer · Alexander Galetovic

156 citations0/0 files storedAmerican Economic Review

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Auction Theory and Applications Transport and Economic Policies Public-Private Partnership Projects

Abstract

We build a conceptual framework to analyze the virtues and limitations of alternative mechanisms that can be used to auction a highway. We argue that current mechanisms, which fix the term of the franchise, create unnecesary risk and facilitate post-contract opportunism by the regulator and the franchise-holder. We propose a new mechanism that allocates the franchise to the firm asking the least present value of toll revenue. We argue that this mechanisms is clearly superior to those currently in use.

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1994Going private: the international experience with transport privatization

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2016Auctions with Contingent Payments 2009Enabling Development of the Transportation Public-Private Partnership Market in the United States 1998Private Opportunity, Public Benefit?2007Second-best road pricing through highway franchising 2004Flexible-term contracts for road franchising 2009Properties of Pareto-efficient contracts and regulations for road franchising 2002Private Financing of Transport Infrastructure An Assessment of the UK Experience 2007Auctioning concessions for private roads

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