Cost-benefit Analysis for Networks －Theory and Application－

Abstract

We develop the benefit-estimation method, explicitly taking networks into account. Our theoretical model shows that the benefits from a decrease in cost or an increase in capacity at link ij equal the changes in consumer surplus and revenues from congestion tax at link ij plus the changes in net congestion externalities at all the links but link ij. This result demonstrates that the usual benefit-estimation method is valid even if we take networks into account and that we do not have to consider additional benefits. Applying the results, we pin down the problems in current benefit-estimation methods in Japan.