Agent-Based Model of Price Competition and Product Differentiation on Congested Networks

Recently published:
Zhang, Lei, David Levinson, and Shanjiang Zhu (2008) Agent-Based Model of Price Competition and Product Differentiation on Congested Networks. . Journal of Transport Economics and Policy Sept. 2008 42(3) pp. 435-461. [download]

Using consistent agent-based techniques, this research explores the welfare consequences of product differentiation on congested networks. The economic analysis focuses on the source, evolution, measurement, and impact of product differentiation with heterogeneous users on a mixed ownership network. Path differentiation and space differentiation are defined and measured for a base scenario and several variants. The findings favour a fixed-rate road pricing policy compared to complete pricing freedom on toll roads. It is also shown that the impact of production differentiation on welfare is not always positive and depends on the level of user heterogeneity.