Capacity and toll choice of an add-on toll road under various ownership regimes

This paper considers the problem of how to select the toll and capacity levels of a new toll road added onto an existing network with a single link. The existing network has various ownership regimes: free, public or private owned toll road. The effects of the ownership regime of the existing network on the capacity and toll selections of the add-on toll road, the efficiency of the whole network in the sense of total social benefit, and the investment incentives of the government to develop the new road are investigated when the traffic demand is elastic or inelastic.