A Nash bargaining solution to models of tax and investment competition: tolls and investment in serial transport corridors

Bruno De Borger and Wilfried Pauwels ()
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Wilfried Pauwels: University of Antwerp

No 2010/1, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: The purpose of this paper is to study toll and investment competition along a serial transport corridor competition allowing for partial cooperation between regional governments. Partial cooperation is modeled as a Nash bargaining problem with endogenous disagreement points. We show that the bargaining approach to partial cooperation implies lower tolls and higher quality and capacity investment than fully non-cooperative behavior. Moreover, under bargaining, strategic behavior at the investment stage induces regions to offer lower quality and invest less in capacity as compared to full cooperation. Finally, Nash bargaining partially resolves the problem of welfare losses due to toll and capacity competition pointed out in the recent literature.

Keywords: Nash bargaining; tax competition; congestion pricing (search for similar items in EconPapers)
JEL-codes: H71 H77 R42 R48 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2010
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ieb:wpaper:doc2010-1

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