What are some alternative means of funding roads/highways?

[HighwayStar]

Anyway...

Back to the service plazas.
Estimating the potential funding from service plazas on a national scale is difficult as I previously indicated. However, I did find some numbers on PA which should help, but this is going to be more of a consulting estimate type answer, meant to size the amount on magnitude, not calculate it precisely. That said, let's run the numbers.

This is the link for the numbers https://www.pennlive.com/politics/2016/08/pa_turnpike_service_plazas_mor.html

I'm using the 2015 numbers for sales, which were

C Store    $28,064,757
Diesel    $17,991,260
Gas    $43,411,528
Food    $62,206,077

The royalty is 3% on C store goods, 4% on food, and 1 cent for each gallon of fuel. Assuming fuel was 2.50 a gallon in 2015, that gives us a total revenue of $3,575,797 or $3.6 million.

Now the actual structure of the economics of the service plazas is very complex, as PA did leases of varying lengths that had a "rebuild/refurbish" requirement whereby the leaseholders also paid for that capital improvement, to the tune of $170 Million. Using the assumption of 30 years for both leaseholders (one has that outright, the other holds the options for it) we can get a rough idea of how much of the deal was the capital investment versus the royalty.
I'm going to assume 5% as the discount rate due to the stability of this cash flow relative to the 8% of the stock market. I'm also going to use the assumption of monthly payments, which are 1/12 of the annual $3.6M, so $300k. Using the PV of an Annuity formula we get $56.6 M.

So the total value of the 30 year lease was $170M + $56.6M, or $227M.
And thus, working backwards from this number we can calculate what the annual royalty would need to be in an all royalty deal to be worth $227M over 30 years.
This comes out to be $1.20M per month for 17 service plazas in PA.

Now, in extrapolating to the entire country the estimate is going to be rough. By no means are all roads in PA served by service plazas, but even if we assume the state has as many as it should we can use it to extrapolate for the rest of the country.
In doing so I will use population to extrapolate, which gives the total for the country as $28.8M a month, and thus $346M per year.

This seems a lot lower than the billboard revenue estimate, but given the relatively small number of service plazas this would represent (410 nationally based on the above scaling) and the likely low royalty that PA is getting for its plazas I suppose it is reasonable. A better designed scheme should be able to multiply this figure at least into the range of the billboard revenue estimate.

[kalvado]

Anyway...

Back to the service plazas.
Estimating the potential funding from service plazas on a national scale is difficult as I previously indicated. However, I did find some numbers on PA which should help, but this is going to be more of a consulting estimate type answer, meant to size the amount on magnitude, not calculate it precisely. That said, let's run the numbers.

This is the link for the numbers https://www.pennlive.com/politics/2016/08/pa_turnpike_service_plazas_mor.html

I'm using the 2015 numbers for sales, which were

C Store    $28,064,757
Diesel    $17,991,260
Gas    $43,411,528
Food    $62,206,077

The royalty is 3% on C store goods, 4% on food, and 1 cent for each gallon of fuel. Assuming fuel was 2.50 a gallon in 2015, that gives us a total revenue of $3,575,797 or $3.6 million.

Now the actual structure of the economics of the service plazas is very complex, as PA did leases of varying lengths that had a "rebuild/refurbish" requirement whereby the leaseholders also paid for that capital improvement, to the tune of $170 Million. Using the assumption of 30 years for both leaseholders (one has that outright, the other holds the options for it) we can get a rough idea of how much of the deal was the capital investment versus the royalty.
I'm going to assume 5% as the discount rate due to the stability of this cash flow relative to the 8% of the stock market. I'm also going to use the assumption of monthly payments, which are 1/12 of the annual $3.6M, so $300k. Using the PV of an Annuity formula we get $56.6 M.

So the total value of the 30 year lease was $170M + $56.6M, or $227M.
And thus, working backwards from this number we can calculate what the annual royalty would need to be in an all royalty deal to be worth $227M over 30 years.
This comes out to be $1.20M per month for 17 service plazas in PA.

Now, in extrapolating to the entire country the estimate is going to be rough. By no means are all roads in PA served by service plazas, but even if we assume the state has as many as it should we can use it to extrapolate for the rest of the country.
In doing so I will use population to extrapolate, which gives the total for the country as $28.8M a month, and thus $346M per year.

This seems a lot lower than the billboard revenue estimate, but given the relatively small number of service plazas this would represent (410 nationally based on the above scaling) and the likely low royalty that PA is getting for its plazas I suppose it is reasonable. A better designed scheme should be able to multiply this figure at least into the range of the billboard revenue estimate.

Think about it from a different side. Somewhat average federal fuel tax can be estimated as $100 per car annually (13 k miles @26 mpg =500 gallons, *18 cents)
If you want to extract 10% of that via service plazas, while assuming 10% of revenue going towards road budget, average driver would need to spend $100 annually at those plazas. Which may be about right.
That would mean that service plazas are at least 5% expensive than independent business off exit - and likely more
Or look at existing business. Pilot flying J has annual revenue of $20B. That probably means $1B can be extracted as road funding - a very optimistic number. Even if combined services would be 5x , that still a small fraction of $43B highway fund brings in annually.

Yet another way is to look at revenue from toll plazas as a fraction of toll road budget - NYS thruway would be a good example with very captive service areas and complex time-consuming exits. Would be a small fraction as well. 

[skluth]

Arkansas now has a dedicated 1/2 cent sales tax dedicated to highways according to this line, "Taldo said the quarter-cent sales tax dedicated to highways that voters approved in November 2020 is allowing the state to plan projects a lot further out." They've already accepted the gas tax isn't enough.

[hbelkins]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

[HighwayStar]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

[kalvado]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

[hbelkins]

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.

I chose that term over "price gouging" because I knew how you'd react to that term. Not terribly surprised that you reacted in the same manner.

How would you describe the pricing structure of a business that either has a captive customer base or a monopoly that sets those prices at levels higher than they otherwise would be found in a competitive market?

If you go to a grocery store in a town that only has one such grocery store, it can set prices at whatever level it wants because it can. There's no competition. The same grocery store, situated in a town with other grocery stores, will either have competitive prices or will offer some sort of special service to justify the higher prices.

I've been in businesses where something that was obviously purchased at a retail store for a much lower price is on the shelf priced at two or three times the retail rate at other venues. At one of the campground stores I was in last summer in Montana, there was a food item that had quite obviously been bought at Dollar Tree and the store was asking $2.50 for it. Why? Because it could; there was no other place in that little town to buy anything. What term would you use to describe that? Predatory pricing? Price gouging? What, exactly?

And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Unfortunately, they can, thanks to a terrible Supreme Court precedent. The name of the court case escapes me but I think it was out of Connecticut. Just because they can doesn't mean they should.

[HighwayStar]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

[HighwayStar]

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.

I chose that term over "price gouging" because I knew how you'd react to that term. Not terribly surprised that you reacted in the same manner.

How would you describe the pricing structure of a business that either has a captive customer base or a monopoly that sets those prices at levels higher than they otherwise would be found in a competitive market?

If you go to a grocery store in a town that only has one such grocery store, it can set prices at whatever level it wants because it can. There's no competition. The same grocery store, situated in a town with other grocery stores, will either have competitive prices or will offer some sort of special service to justify the higher prices.

I've been in businesses where something that was obviously purchased at a retail store for a much lower price is on the shelf priced at two or three times the retail rate at other venues. At one of the campground stores I was in last summer in Montana, there was a food item that had quite obviously been bought at Dollar Tree and the store was asking $2.50 for it. Why? Because it could; there was no other place in that little town to buy anything. What term would you use to describe that? Predatory pricing? Price gouging? What, exactly?

And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Unfortunately, they can, thanks to a terrible Supreme Court precedent. The name of the court case escapes me but I think it was out of Connecticut. Just because they can doesn't mean they should.

Oh no, the return of GoUgInG.

How would you describe the pricing structure of a business that either has a captive customer base or a monopoly that sets those prices at levels higher than they otherwise would be found in a competitive market?

First off, the market is competitive, just because you don't have several sellers at every single point in time in every single place does not change that.
McDonalds is not a monoploly because they won't let you order a Whopper inside their store, if you want a different sandwich you can cross the street.

What term would you use to describe that? Predatory pricing? Price gouging? What, exactly?

Simple, just pricing. The price is higher than it is somewhere else, so what? Prices at dollar tree are higher than wholesale, I guess every dollar tree in the country is gouging their customers too!
If you want to buy it, then do so, and if you don't fine, someone else might have a higher reservation price than you do. Its just pricing. But to attach this irrational emotional significance to the price at some arbitrary level beyond which it is somehow evil or demonic is absurd.

[Scott5114]

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.

Speaking of things that make it hard to accept someone's conclusions at face value...has your opinion on I-70 in Baltimore become any less nonsensical?

[HighwayStar]

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.

Speaking of things that make it hard to accept someone's conclusions at face value...has your opinion on I-70 in Baltimore become any less nonsensical?

I consider my position sensible, if perhaps a bit pedantic, that I-70 does not go to Baltimore. 

[kalvado]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

[Scott5114]

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.

Speaking of things that make it hard to accept someone's conclusions at face value...has your opinion on I-70 in Baltimore become any less nonsensical?

I consider my position sensible [...] that I-70 does not go to Baltimore. 

Neat. You're the only person that does.

[HighwayStar]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

[edwaleni]

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.

Speaking of things that make it hard to accept someone's conclusions at face value...has your opinion on I-70 in Baltimore become any less nonsensical?

I consider my position sensible [...] that I-70 does not go to Baltimore. 

Neat. You're the only person that does.

Hey after all, I-80 goes to Chicago, but doesn't go into Chicago proper.

As for road funding, it will be a combination of methods as the fuel mix changes.

https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/state-and-local-backgrounders/motor-fuel-taxes

[HighwayStar]

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.

Speaking of things that make it hard to accept someone's conclusions at face value...has your opinion on I-70 in Baltimore become any less nonsensical?

I consider my position sensible [...] that I-70 does not go to Baltimore. 

Neat. You're the only person that does.

Hey after all, I-80 goes to Chicago, but doesn't go into Chicago proper.

As for road funding, it will be a combination of methods as the fuel mix changes.

https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/state-and-local-backgrounders/motor-fuel-taxes

I-80 was completed as designed though, I-70 was not.

And of course a hipster think tank is going to say fuel taxes are the answer, but that does not make it true. Alternative funding sources are a great way to fund roads and in the case of service plazas improve traveler experiences.

[Rothman]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

Egads.  Somebody missed the "aggregate" in their P/Q graphs in Econ 101.

[HighwayStar]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

Egads.  Somebody missed the "aggregate" in their P/Q graphs in Econ 101.

Nope, aggregating willingness to pay into a demand curve does not change that fundamental fact. You still end up setting prices based on demand of the buyers. Notice that in a competitive market, the equilibrium price is such that the last buyer is the one that is just barely willing to pay. You never end up with buyers paying more than they are willing, aggregated or not. 

[Rothman]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

Egads.  Somebody missed the "aggregate" in their P/Q graphs in Econ 101.

Nope, aggregating willingness to pay into a demand curve does not change that fundamental fact. You still end up setting prices based on demand of the buyers. Notice that in a competitive market, the equilibrium price is such that the last buyer is the one that is just barely willing to pay. You never end up with buyers paying more than they are willing, aggregated or not. 

You're ignoring the supply side...

[HighwayStar]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

Egads.  Somebody missed the "aggregate" in their P/Q graphs in Econ 101.

Nope, aggregating willingness to pay into a demand curve does not change that fundamental fact. You still end up setting prices based on demand of the buyers. Notice that in a competitive market, the equilibrium price is such that the last buyer is the one that is just barely willing to pay. You never end up with buyers paying more than they are willing, aggregated or not. 

You're ignoring the supply side...

The supply side does not set the price, it only sets a price floor. Ever heard of price discrimination?
In any case, my above point about rent is explicitly about supply and why we can be comfortable with the rent being the same on and off highway.

[Rothman]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

Egads.  Somebody missed the "aggregate" in their P/Q graphs in Econ 101.

Nope, aggregating willingness to pay into a demand curve does not change that fundamental fact. You still end up setting prices based on demand of the buyers. Notice that in a competitive market, the equilibrium price is such that the last buyer is the one that is just barely willing to pay. You never end up with buyers paying more than they are willing, aggregated or not. 

You're ignoring the supply side...

The supply side does not set the price, it only sets a price floor. Ever heard of price discrimination?
In any case, my above point about rent is explicitly about supply and why we can be comfortable with the rent being the same on and off highway.

Neither supply nor demand sets the price independently of each other.

It's also seeming like you think markets are efficient in reality.  Any economics professor worth their salt will tell you that the examples in your textbook are simply heuristic.

[HighwayStar]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

Egads.  Somebody missed the "aggregate" in their P/Q graphs in Econ 101.

Nope, aggregating willingness to pay into a demand curve does not change that fundamental fact. You still end up setting prices based on demand of the buyers. Notice that in a competitive market, the equilibrium price is such that the last buyer is the one that is just barely willing to pay. You never end up with buyers paying more than they are willing, aggregated or not. 

You're ignoring the supply side...

The supply side does not set the price, it only sets a price floor. Ever heard of price discrimination?
In any case, my above point about rent is explicitly about supply and why we can be comfortable with the rent being the same on and off highway.

Neither supply nor demand sets the price independently of each other.

It's also seeming like you think markets are efficient in reality.  Any economics professor worth their salt will tell you that the examples in your textbook are simply heuristic.

Prices are set by what a buyer will pay, not by the supply. No amount of supply of anything can set the price for something no one desires. The only impact supply has is the establishment of a floor.

Nowhere have I claimed markets are perfectly efficient, that is a strawman. They do however always seek equilibrium which is fundamentally close enough for our purposes here.

[hotdogPi]

You might want to trim that quote chain.

[Rothman]

We've discussed the service plaza thing before. They're entirely logical on closed-system toll roads, especially when exiting and re-entering can incur a higher toll than going straight through. It makes for a more captive audience because of the convenience factor, and with that captive audience you get predatory pricing. And some of the service plazas have problematic left exits and entrances.

They're less workable on free routes, because they compete with privately-owned businesses at the exits, which would employ a full-court legislative lobbying press against any efforts for the government seeking to compete with them. And the businesses would have more competitively-priced products. It's not really a great inconvenience to get off the interstate to get gas or food.

The only reason I stop at the service plaza on the Western Kentucky Parkway is basically for novelty reasons, and if I need to pee. Otherwise, I will usually stop at Central City or Leitchfield if I need gas or want a bite to eat, and if I'm going east, I try to hold out until Elizabethtown because there are so many more options and gas is usually cheaper. I'm not a fan of the short acceleration area to merge back into the road into the fast lane. The only saving grace is that the road is not all that heavily traveled.

Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall.

predatory pricing

Its this kind of jaberwocky terminology that makes it hard to accept your conclusions at face value.
I 100% agree that on toll roads the convenience factor is higher with fewer exits being in place, that is not up for dispute.

However, there is no reason that on road plazas cannot displace off highway plazas either. I would imagine the model would be analogous to Hotelling's linear city, ie. there is a location of consumers on the road, and firms seek to be as close to them as possible.

Importantly, the assumption that prices need to be higher on the roadway need not hold for these new plazas. Firms locating on the highway could simply price match and be at a considerable advantage. In that case the rental value of the facilities should be equal to the off highway alternatives.

If we assume that the number of locations is comparable to Flying J + Loves, and a 5% take on the revenue as rent, that still generates $40B*5% or 2 Billion dollars a year, which is not a negligible sum.

Also this Government-run businesses on interstates competing with private businesses at the exits isn't going to be a windfall. is misunderstanding the proposition. I am not proposing the government run businesses on the interstates, I am proposing the government auction the operating rights/rents, etc. to private corporations for limited periods for on highway plazas.

In the long run, I would expect these on highway plazas to displace most of the off highway plazas. There are other pressures which bear on this, locals often oppose off highway projects, building them as part of the highway itself would offer additional separation from communities. And the federal government can use eminent domain to obtain property in areas where a private corporation would be unable to build a plaza on its own.

Lets put it so - whatever costs and profits at the off-highway business going to be, on-highway business would face same costs and would need to bring same profit, plus whatever outlay to a highway fund would be. Only thing you can play with is rent/tax on a parcel within ROW. I don't believe it will be a significant benefit. So price on plaza would be higher by whatever that highway outlay would be. If you propose  eminent domain, you'll have to endure many expensive lawsuits eating up profit for quite some time. That's if (big if!) eminent domain for a restaurant would survive in court.

What? None of that made any sense at all.
So price on plaza would be higher by whatever that highway outlay would be.
That fails on multiple levels.
First, prices are set by what a buyer will pay, not by costs, this is the first lesson of Econ 101.
Second, rent "off highway" is not free, it is also a cost.
So even if we assume no difference in the reservation price of buyers, the on highway facilities should rent for at least what the off highway facilities rent for.

As to lawsuits, the simple answer is for the government to fiat it through. The highways are a national security matter, simply change the law so no one can sue to impede their construction.

When you take Economy 151 next semester, they may tell you how business expenses have to correlate with prices and ability to do business in a given market...

I passed the 100 series courses long ago kid. And your assertion still incorrect, prices are set by what a buyer will pay. That does not change no matter what econ course you take.
Proof? You cannot sell goods/services to buyers at a price higher than they are willing to pay. End of discussion.
Now, if the cost of providing a good/service is higher than the price buyers are willing to pay, then it does not come into existence. But all prices ultimately rest on what a buyer will pay, not what it cost you to provide the good/service.
And to tie this back to the original point, even if we have to establish a price "floor" based on costs, then the assertion you made, that price on plaza would be higher by whatever that highway outlay would be then implicitly requires that the companies off the highway are paying 0 in rent.
Now, if you are telling me you have access to prime interstate side real estate that rents for 0 then we can go into the truck stop business and be millionaires. 

Egads.  Somebody missed the "aggregate" in their P/Q graphs in Econ 101.

Nope, aggregating willingness to pay into a demand curve does not change that fundamental fact. You still end up setting prices based on demand of the buyers. Notice that in a competitive market, the equilibrium price is such that the last buyer is the one that is just barely willing to pay. You never end up with buyers paying more than they are willing, aggregated or not. 

You're ignoring the supply side...

The supply side does not set the price, it only sets a price floor. Ever heard of price discrimination?
In any case, my above point about rent is explicitly about supply and why we can be comfortable with the rent being the same on and off highway.

Neither supply nor demand sets the price independently of each other.

It's also seeming like you think markets are efficient in reality.  Any economics professor worth their salt will tell you that the examples in your textbook are simply heuristic.

Prices are set by what a buyer will pay, not by the supply. No amount of supply of anything can set the price for something no one desires. The only impact supply has is the establishment of a floor.

Nowhere have I claimed markets are perfectly efficient, that is a strawman. They do however always seek equilibrium which is fundamentally close enough for our purposes here.

Repeating a wrong statement doesn't make it right (see OPEC's historic ability to affect prices through supply...or the U.S.' use of agricultural subsidies...).  Your argument regarding rents and service plazas are based upon a perfect implementation of the heuristic principles you parrot.

The idea that our markets in reality always seek equilibrium is absolutely not founded in our country in a lot of cases given that businesses have rigged them through legislation and other means to maximize their profits.  Our government is not providing the environment needed so markets operate like they do in economics textbooks (i.e., the criteria for market operation are not being met).

[Rothman]

You might want to trim that quote chain.

Doing so on a phone is really annoying.  Once the "price" of doing so comes down to something I'm "willing to pay," I will do so.