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Transport cost functions, network expansion and economies of scope

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  • Jara-Díaz, Sergio R.
  • Basso, Leonardo J.

Abstract

This paper shows technically that economies of transport network expansion should be viewed through the concept of economies of scope rather than through the concept of economies of scale. The basic technological dimensions that are specific to transport production are identified. The framework is used to derive explicit cost functions for two and three nodes systems in order to show how the potential technical advantages of network expansions (new nodes served) are transferred into transport cost functions. These advantages are shown to translate into economies of scope that can exist even under constant returns to scale.

Suggested Citation

  • Jara-Díaz, Sergio R. & Basso, Leonardo J., 2003. "Transport cost functions, network expansion and economies of scope," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 39(4), pages 271-288, July.
    • Handle: RePEc:eee:transe:v:39:y:2003:i:4:p:271-288
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    Citations

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    Cited by:

    1. Juan Martín & Augusto Voltes-Dorta, 2008. "Theoretical Evidence of Existing Pitfalls in Measuring Hubbing Practices in Airline Networks," Networks and Spatial Economics, Springer, vol. 8(2), pages 161-181, September.
    2. Fielbaum, Andrés & Jara-Diaz, Sergio & Gschwender, Antonio, 2020. "Beyond the Mohring effect: Scale economies induced by transit lines structures design," Economics of Transportation, Elsevier, vol. 22(C).
    3. Laird, James J. & Nellthorp, John & Mackie, Peter J., 2005. "Network effects and total economic impact in transport appraisal," Transport Policy, Elsevier, vol. 12(6), pages 537-544, November.
    4. Dan Liu & Zhenghong Deng & Qipeng Sun & Yong Wang & Yinhai Wang, 2019. "Design and Freight Corridor-Fleet Size Choice in Collaborative Intermodal Transportation Network Considering Economies of Scale," Sustainability, MDPI, vol. 11(4), pages 1-19, February.
    5. Domenico Gattuso & Margherita Malara & Gian Carla Cassone, 2020. "Planning and Simulation of Intermodal Freight Transport on International Networks. Hub and Spoke System in Euro-Mediterranean Area," Sustainability, MDPI, vol. 12(3), pages 1-14, January.
    6. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    7. Anne Lange & Werner Delfmann, 2017. "Network concentration indices for less-than-truckload transportation," Transportation, Springer, vol. 44(6), pages 1475-1497, November.
    8. Mehdi Farsi & Massimo Filippini & William Greene, 2005. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," Journal of Regulatory Economics, Springer, vol. 28(1), pages 69-90, July.
    9. Sergio Jara-Díaz & Antonio Gschwender & Meisy Ortega, 2014. "The impact of a financial constraint on the spatial structure of public transport services," Transportation, Springer, vol. 41(1), pages 21-36, January.
    10. van den Heuvel, Frank P. & de Langen, Peter W. & van Donselaar, Karel H. & Fransoo, Jan C., 2013. "Spatial concentration and location dynamics in logistics: the case of a Dutch province," Journal of Transport Geography, Elsevier, vol. 28(C), pages 39-48.
    11. Leonardo Basso & Sergio Jara-Díaz, 2006. "Distinguishing Multiproduct Economies of Scale from Economies of Density on a Fixed-Size Transport Network," Networks and Spatial Economics, Springer, vol. 6(2), pages 149-162, June.
    12. Flores-Fillol, Ricardo, 2010. "Congested hubs," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 358-370, March.
    13. Verny, Jerome & Grigentin, Christophe, 2009. "Container shipping on the Northern Sea Route," International Journal of Production Economics, Elsevier, vol. 122(1), pages 107-117, November.
    14. Johnston, Ahren & Ozment, John, 2013. "Economies of scale in the US airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 51(C), pages 95-108.
    15. Leonardo J. Basso & Sergio R. Jara-Díaz & William G. Waters, 2011. "Cost Functions for Transport Firms," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 12, Edward Elgar Publishing.
    16. Leonardo J. Basso & Sergio R. Jara-Díaz, 2006. "Are Returns to Scale with Variable Network Size Adequate for Transport Industry Structure Analysis?," Transportation Science, INFORMS, vol. 40(3), pages 259-268, August.
    17. Christian von Hirschhausen & Astrid Cullmann, 2008. "Next Stop: Restructuring?: A Nonparametric Efficiency Analysis of German Public Transport Companies," Discussion Papers of DIW Berlin 831, DIW Berlin, German Institute for Economic Research.
    18. Marcos Singer & Patricio Donoso & Sven Widdel, 2007. "¿Premian Las Tarifas El Desempeño Del Transportista?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 10(1), pages 21-55.
    19. Jara-Díaz, Sergio R. & Cortés, Cristián E. & Morales, Gabriela A., 2013. "Explaining changes and trends in the airline industry: Economies of density, multiproduct scale, and spatial scope," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 60(C), pages 13-26.

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