TY - JOUR
T1 - Joint investment on resilience of cross-country transport infrastructure
AU - Zheng, Shiyuan
AU - Chen, Xirong
AU - Dong, Kangyin
AU - Wang, Kun
AU - Fu, Xiaowen
N1 - Funding Information:
Financial support from the National Key Research and Development Program of China (2020YFE0201200), the Hong Kong Research Grants Council (POLYU 15215621 -Q85W) and the National Science Foundation of China (72031005, 72072113, 72103035), the Fundamental Research Funds for the Central Universities in UIBE Beijing, China (CXTD11-04) are gratefully acknowledged.
Publisher Copyright:
© 2022 Elsevier Ltd
PY - 2022/12
Y1 - 2022/12
N2 - Unlike the domestic transport infrastructure, the cross-country ones are subject to more diverse and unconventional disruption risks due to the unstable geopolitical conditions, terrorist attacks, and complex landscape and extreme weather events, thus calling for resilience-related investments from different countries. However, such resilience investment made by one country to deal with such unconventional disruption risk is very hard to be verified by other countries (i.e., non-verifiability). This paper establishes an integrated economic model to analytically examine countries’ joint resilience investments on the cross-country transport infrastructure in presence of non-verifiability. Specifically, there is one “investing country” who constructed the infrastructure which is also used by a “host country”. Our analytical results suggest that the first-best investment and market outcomes for the global welfare maximization can be achieved if the resilience investment is verifiable. The non-verifiability is, however, found to cause a downward distortion in the resilience investment and an upward distortion in transport price when the probability of the disruption is higher such that the resilience investment only partially covers the potential loss. On the contrary, when the probability of disruption is low so that the resilience investment can lead to the full loss coverage, the first-best outcomes can still be achieved without any distortion. Our analytical model is also extended to account for the intermodal competition. Although our main conclusions still qualitatively hold, the intermodal competition is found to have uncertain effects on the market outcomes, depending on the interaction between the resilience investment cost and the degree of the intermodal competition.
AB - Unlike the domestic transport infrastructure, the cross-country ones are subject to more diverse and unconventional disruption risks due to the unstable geopolitical conditions, terrorist attacks, and complex landscape and extreme weather events, thus calling for resilience-related investments from different countries. However, such resilience investment made by one country to deal with such unconventional disruption risk is very hard to be verified by other countries (i.e., non-verifiability). This paper establishes an integrated economic model to analytically examine countries’ joint resilience investments on the cross-country transport infrastructure in presence of non-verifiability. Specifically, there is one “investing country” who constructed the infrastructure which is also used by a “host country”. Our analytical results suggest that the first-best investment and market outcomes for the global welfare maximization can be achieved if the resilience investment is verifiable. The non-verifiability is, however, found to cause a downward distortion in the resilience investment and an upward distortion in transport price when the probability of the disruption is higher such that the resilience investment only partially covers the potential loss. On the contrary, when the probability of disruption is low so that the resilience investment can lead to the full loss coverage, the first-best outcomes can still be achieved without any distortion. Our analytical model is also extended to account for the intermodal competition. Although our main conclusions still qualitatively hold, the intermodal competition is found to have uncertain effects on the market outcomes, depending on the interaction between the resilience investment cost and the degree of the intermodal competition.
KW - Cross-country
KW - Intermodal competition
KW - Non-verifiability
KW - Principal-agent model
KW - Resilience
KW - Transport infrastructure
UR - http://www.scopus.com/inward/record.url?scp=85142153548&partnerID=8YFLogxK
U2 - 10.1016/j.tra.2022.11.004
DO - 10.1016/j.tra.2022.11.004
M3 - Journal article
AN - SCOPUS:85142153548
SN - 0965-8564
VL - 166
SP - 406
EP - 423
JO - Transportation Research, Part A: Policy and Practice
JF - Transportation Research, Part A: Policy and Practice
ER -