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

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. Date of receipt of final manuscript: August 2008 435 Journal of Transport Economics and Policy, Volume 42, Part 3, September 2008, pp. 435–461