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"While competition adds to the incentives for producers to build and price particular items efficiently, the issue is whether those efficiencies would be greater or less than the inefficiencies created by the duplication of infrastructure implied in the competitive road market you apparently envision." Option A: A Govenrment monopoly funded by regressive taxes, low volume, dangerous, no incentive to maximise use, constructed using goods bought in an institutional amrket Option B: A range of alternative choices, with price and non price competition in supply and end use demand. Allocatively, there are "too many" roads. Wouldn't profitabilty decide this? Is having two different routes to Penrith from Liverpool inefficient, or do they serve more than one purpose? "In regards to the notion that the threat of entry would keep private road operators in check, this does not seem particular likely. Roads have extremely high up front costs and long lead times." Why not? Those start up costs are high due to capital market restrcitions, environmental regulation and high taxation of capital and labour. Also, the Govenrment crowds out competition now. There are mnay indistries where economies of scale are a natural abrrier to entry, which price competitively because there are minimal (none but the above stated) barriers to entry. There are plenty which price incompetitively due to high barriers to entry. There are plenty with minimal or moderate scale, but high barriers to entry which price inefficiently. There are no industries with minimal barriers and irrelevant economies of scale which are incompetitive.
"It is difficult to envision the owner of, say, the Hume Highway between Goulburn and Yass, or the Armidale-to-Tamworth road, losing too much sleep (or changing its pricing/quality choice) at the prospect of awaking one morning to find a new road competing for its custom. That said, there is potentially more scope for competition between different trunk routes within a city, or will be as tolling technology develops." They have much more to worry about than competitors in the transport industry who use the same capital and technology. Are you saying that Virgin is not competition to Ford or Caltex? You don't compete against substitutes? If this were true, there would be PERFECTLY inelastic demand curves, for
ALL goods! "None of this, incidentally, is based on "ignorance" of the imperfections of State-owned roads. One could well make the judgement that privately-owned and monopolised roads are better than government-owned and monopolised roads. However, this judgment is largely separate to the issue of merits of competition between road owners." But the road owners just don't compete with each other. The Airlines don't compete with just each other.
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