Regulating concessions of toll motorways: An empirical study on fixed vs. variable term contracts

Recent theoretical developments oil concession contracts for long term infrastructure projects under uncertain demand show the benefits of allowing for flexible term contracts rather than fixing a rigid term. This Study presents a Simulation to compare both alternatives by using real data from the oldest Spanish toll motorways. For this purpose, we analyze how well the flexible term Would have performed instead of the fixed length actually established. Our results show a huge reduction of the term of concession that would have dramatically decreased the firm's benefits and the user's overpayment due to the internalization of an unexpected traffic increase. (c) 2008 Elsevier Ltd. All rights reserved.