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Number of Points Served and Economies of Spatial Scope in Transport Cost Functions

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  • Sergio R. Jara-Díaz
  • Cristián Cortés
  • Freddy Ponce

Abstract

Within the context of transport cost functions, network variables have been traditionally used to calculate what is called economies of scale (RTS) as opposed to those of density (RTD). This paper argues that increasing network size is unambiguously associated with an increase in the number of products and, therefore, network variables are related with economies of scope. This is rigorously shown using the variable "number of points served" which suggests that RTS hides scope while RTD represents scale. An analytical relation between the network size elasticity of cost and economies of spatial scope is derived. This finding induces an alternative interpretation of the results obtained from transport cost functions with aggregate output descriptions. ? The London School of Economics and the University of Bath 2001

Suggested Citation

  • Sergio R. Jara-Díaz & Cristián Cortés & Freddy Ponce, 2001. "Number of Points Served and Economies of Spatial Scope in Transport Cost Functions," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 327-341, May.
  • Handle: RePEc:tpe:jtecpo:v:35:y:2001:i:2:p:327-341
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    Cited by:

    1. Filippini, M. & Koller, M. & Masiero, G., 2015. "Competitive tendering versus performance-based negotiation in Swiss public transport," Transportation Research Part A: Policy and Practice, Elsevier, vol. 82(C), pages 158-168.
    2. Kreutzberger, Ekki D., 2008. "Distance and time in intermodal goods transport networks in Europe: A generic approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(7), pages 973-993, August.
    3. 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.
    4. 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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