Profitability and welfare gain of private toll roads in a network with heterogeneous users

The recent worldwide tendency towards the introduction of commercially and privately provided roads proves to be efficient for building and operating road systems. One of the important issues concerning development of a private toll road is the selection of its capacity and toll charge and the evaluation of the relevant benefits to the private investor, the road users and the whole society. Yang and Meng have recently examined this critical issue in a road network context. An important limitation in their analysis is that a single (average) value of time (VOT) for all road users is assumed in the network equilibrium model for traffic forecasts. It is a fact that each user has a different VOT, depending on how much money or time he or she is willing or able to spend on a particular trip. This paper relaxes the earlier single VOT assumption using a multi-class network equilibrium model. The entire population of users is segmented into a number of groups or classes according to their VOT, and trip rates by different groups are characterized by distinct group-specific demand functions. Users are assumed to minimize their individual generalized trip cost, and thus divide themselves among the various alternative routes that are differentiated on the basis of travel time and monetary cost. With the explicit consideration of user heterogeneity, we investigate the various possibilities of profitability and welfare gain of a private toll road in a given network under various combinations of road capacity and toll charge. In particular, we compare and contrast the outcomes with the case of a single average VOT, and investigate how VOT distribution affects traffic flow and profit forecasts of private toll roads.