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A nice little story, and one reminicent of the ice-cream seller on the beach scenario**. Yes, let's explore your arguments, but substitute 'petrol station' or 'doctor's surgery' for 'road', and all your reasoning about sunk costs etc still apply. ... Beyond mentioning 'declining costs' several times you have given no reason why roads are different from other products and services. There is no need for me to give additional reasons because the reason I have mentioned 'declining cost industries' several times is that it is the key feature of roads that differentiates it from icecream vending, petrol supply and medical work and leads to economists treating these industries in different ways. With declining cost industries, setting price equal to marginal cost will never cover the fixed (sunk) costs. However, in the case of increasing costs industries (such as ice-cream, fuel, doctors etc), it is not the case that, as you said, "all [my] reasoning about sunk costs etc still applies" because a price that covers marginal costs will also be sufficient to recoup the sunk costs.
In real life there is noise in the system. People provide similar, but non-identical products, and the market produces better results than even the wisest bureaucrat. I agree with all this except for the last assertion. In many cases, the market does indeed produce better results that government, but the question we are currently debating is whether the market produces better results than government in the case of road provision. Your statement simply assumes the answer is yes in all circumstances.
As an interesting aside, if your reasoning were sound, it would provide a good reason for governments to provide roads, but no reason to prevent private building of new roads. If the gummint thought the toll was unreasonable they could just build another road, like they were thinking of doing in the first place. On the contrary, if my reasoning were sound, there is plenty of reason to prevent private road building. As noted in my previous example, in some cases it maybe profitable for a new investor to build a new road and split the monopoly rents with an incumbent, but such an action would involve wasteful duplication of infrastructure and would reduce social welfare overall.
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