The Effect of Key Indicators on the Operation Costs for Public Toll Roads

Abstract

At the end of the build-operate-transfer road concession period, an optimal model for the operation of public toll roads is created based on user heterogeneity regarding the values of time for different road users. The impact of user heterogeneity on operation costs for government and private firms is subsequently analyzed on the following critical variables: user values of time, road volume/capacity ratio, and road capacity. Concerning the values of time for different road users, the mean residual and failure functions are established to describe three optimization hypotheses: maximization of social welfare with operation by the government, two extreme cases with operation by a private firm, and a Pareto-optimal solution with operation by a private firm. It is concluded that the mean residual values of the time function are a linear function of the user values of time under a Pareto-optimal operation by the government. It is also determined that private profit is related to the demand-related operational cost of the government and private firm under a Pareto-optimal operation by a private firm. These conclusions suggest relevant recommendations for the government on policymaking for the operation of public toll roads.