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Do the Usual Results of Railway Returns to Scale and Density Hold in the Case of Heterogeneity in Outputs? A Hedonic Cost Function Approach


  • Phill Wheat
  • Andrew S. J. Smith


This paper highlights the importance of modelling the interaction between returns to scale/density and heterogeneity of services when evaluating optimal size and structure of passenger rail operations. We propose and estimate a hedonic cost function which allows us to incorporate measures of train operator heterogeneity, which are central to evaluating the cost effect of merging heterogeneous train operators, and thus informing policy. We illustrate our model via three rail franchise mergers/remappings in Britain, and show that the wrong policy conclusion result could be obtained by only considering the scale and density properties, in isolation from heterogeneity. © 2015 LSE and the University of Bath

Suggested Citation

  • Phill Wheat & Andrew S. J. Smith, 2015. "Do the Usual Results of Railway Returns to Scale and Density Hold in the Case of Heterogeneity in Outputs? A Hedonic Cost Function Approach," Journal of Transport Economics and Policy, University of Bath, vol. 49(1), pages 35-57, January.
  • Handle: RePEc:tpe:jtecpo:v:49:y:2015:i:1:p:35-57

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    Cited by:

    1. Cherbonnier, Frédéric & Ivaldi, Marc & Muller-Vibes, Catherine & Van Der Straeten, Karine, 2018. "Competition For Versus In the Market of Long-Distance Passenger Rail Services," TSE Working Papers 18-901, Toulouse School of Economics (TSE), revised Apr 2018.
    2. Preston, John, 2018. "The wheels keep on turning: Is the end of rail franchising in Britain in sight?," Research in Transportation Economics, Elsevier, vol. 69(C), pages 187-196.
    3. Wheat, Phill & Smith, Andrew S.J. & Rasmussen, Torris, 2018. "Can competition for and in the market co-exist in terms of delivering cost efficient services? Evidence from open access train operators and their franchised counterparts in Britain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 114-124.
    4. Broman, Emanuel & Eliasson, Jonas, 2018. "Welfare Effects of Open-Access Competition on Railway Markets," Working papers in Transport Economics 2018:12, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    5. Phill Wheat & Alexander D. Stead & Yue Huang & Andrew Smith, 2019. "Lowering Transport Costs and Prices by Competition: Regulatory and Institutional Reforms in Low Income Countries," Sustainability, MDPI, Open Access Journal, vol. 11(21), pages 1-19, October.

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