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

The authors would like to thank the Kiewit Center for Infrastructure and Transportation at the Oregon State University for providing partial financial support. The guest editor and two anonymous reviewers have provided many valuable comments and constructive suggestions. The authors are solely responsible for all statements in the paper. 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 favor 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