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Privately Owned Railways' Cost Function, Organization Size and Ownership


  • Fumitoshi Mizutani



This paper aims to find the optimal size of an urban private rail organization as well as to evaluate cost difference by ownership. First, after selecting privately owned rail companies, we explore explanatory variables which affect the cost of rail service. Second, keeping in mind previous cost studies of the urban passenger rail industry, we estimate variable cost function with the translog cost function and we construct the total cost function. Third, based on the average cost function, conditions are pinpointed which attain minimum average cost. Finally, based on estimated results, we calculate the size of an urban private rail company and the ownership effects on cost. We conclude that optimal size is about 231 million vehicle-km per year, with a network of 63.8 km length. In terms of total costs, public railways have higher costs than private railways. There is no cost difference, however, in terms of variable costs.

Suggested Citation

  • Fumitoshi Mizutani, 2004. "Privately Owned Railways' Cost Function, Organization Size and Ownership," Journal of Regulatory Economics, Springer, vol. 25(3), pages 297-322, May.
  • Handle: RePEc:kap:regeco:v:25:y:2004:i:3:p:297-322

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    1. repec:ces:ifodic:v:3:y:2005:i:4:p:14567569 is not listed on IDEAS
    2. Talebian, Ahmadreza & Zou, Bo, 2015. "Integrated modeling of high performance passenger and freight train planning on shared-use corridors in the US," Transportation Research Part B: Methodological, Elsevier, vol. 82(C), pages 114-140.
    3. Fumitoshi Mizutani & Shuji Uranishi, 2013. "Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries," Journal of Regulatory Economics, Springer, vol. 43(1), pages 31-59, January.
    4. Fumitoshi Mizutani & Andrew Smith & Chris Nash & Shuji Uranishi, 2015. "Comparing the Costs of Vertical Separation, Integration, and Intermediate Organisational Structures in European and East Asian Railways," Journal of Transport Economics and Policy, University of Bath, vol. 49(3), pages 496-515, July.
    5. Leonardo J. Basso & Sergio R. Jara-Díaz & William G. Waters, 2011. "Cost Functions for Transport Firms," Chapters,in: A Handbook of Transport Economics, chapter 12 Edward Elgar Publishing.
    6. Fumitoshi Mizutani & Hideo Kozumi & Noriaki Matsushima, 2009. "Does yardstick regulation really work? Empirical evidence from Japan’s rail industry," Journal of Regulatory Economics, Springer, vol. 36(3), pages 308-323, December.
    7. Fumitoshi Mizutani, 2005. "Regulation and Deregulation in the Japanese Rail Industry," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(4), pages 10-15, 01.
    8. Jitsuzumi, Toshiya & Nakamura, Akihiro, 2010. "Causes of inefficiency in Japanese railways: Application of DEA for managers and policymakers," Socio-Economic Planning Sciences, Elsevier, vol. 44(3), pages 161-173, September.

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