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"As previously argued, competition is unlikely is have much pricing impact in the case of many roads. Where a road is a monopoly and entry barriers curtail entry, "free" competition will result in prices that may significantly exceed the marginal cost of road usage." I expect price to be above marginal costs. Who says that developers won't build roads within non highway areas, the costs being paid for by the residents, cheaper than the costs of car registration, 3x3x3 excise, etc...do you really think that Government allocated roads price at marginal cost? To who? I don't know what is bad about high profits being an incentive to others to supply, or the eventual competition leading to higher wages to the employees. Or does the marginal cost disappear becuase it has been prevously paid for by crowding out or deadweight loss? "No, but I have never claimed that they (or prospective road investors) do and the argument is not dependent on such a view. My point was and is that prospective investors know that the fixed costs of the incumbent will be treated as sunk by the incumbent and this affects their (the prospective investors') assessment of the returns they will receive if they invest in a competing road. This is standard economics." Even future fixed costs? Why does this matter? Why are roads different? "Again this misrepresents my earlier arguments. I have never said that those roads are "wasteful". All I have said is that the Barton-Federal "alternative" does not exert any significant pricing pressure on the Goulburn-Yass section of the Hume." It does if you wish to travel from west of Canberra to the south or east of Canberra. It would be more important if more roads went in these directions after the trasnit through Canberra. In terms of close substitues competing, these modes need to be deregulated too. Do you think a private market would result in the Barton/Federal Triangle? Why would it matter? Can you show otherwise that the Govenrment allocating cpaitla would have net benefit. As someone who uses the Barton, I do not see it as useless. If a massive, freak accident occured on the Hume, the Barton may become very useful to users of the Hume. Why wouldn't price competition occur in the market - considering these roads can lead to more nodes? As for my misrepresentation, sorry, I got my points mixed up.
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