European Regional Science Association ___________________________________________________ August, 2003
Interestingly, one should note that the underestimate of standard COBA practice
takes place even when the induced quantities are correctly estimated. Suppose that the
planning agency has sufficient good experience of transport project so that it can
forecast accurately the quantities q3 regardless of any omission of demand shift. In such
occurrences standard practice will only consider the surfaces AC*q1 + AC*(q3-q1)/2,
where AC is also equal to (eɪ - c2). This surface underestimates the total surplus.
3.2 Why do shippers value time ?
The point here is to identify the reasons for which the shippers value time. McKinnon
(95) proposed that the value placed by shipper on faster transportation were linked with a
threefold phenomenon : (i) Spatial concentrations, more reduced transportation can permit
to concentrate productions and distribution in less locations, providing potential
economics ; (ii) tighter scheduling ; Mc Kinnon also quotes a third factor that is (iii)
market expansion, which we will not include as a reason explaining the shift in supply
curve, as from our point of view, it is not a cause of the shift but is another way to name
this shift.
We propose here to provide a two sided explanation to this shift in demand.
Shippers shift their demand on the freight market on the one hand because (non
transport) costs are reduced, and on the other hand because revenues are increased.
First, non-transport production costs are correlated to transportation services
duration. These phenomenon have been investigated for instance by Aschauer (82),
Allen et al. (94), Quarmby (89) and BTRE (99) ; although these inquiries usually do not
distinguish whether the non-transport costs decrease in relation to transport cost, or in
relation to transport time. The difficulty here is that economy bearing time reduction are
collinear to economy bearing transport cost reduction. Still one should consider that
when transport cost remain the same, shippers' production cost exhibit transport time
related economies. Transportation time related economies for the shipper are due to the
reorganisation of production and distribution process that can take place among
shippers, when transport conditions are changed. This can occur through consolidation
of intermediate warehouses. Suppose that a firm wants to have all customer within reach
of a maximum delay, then a reduction of travel time will allow to use less locations and
let the firm take advantage of concentration economies. Also one should recognise that
such effects will be significant only when the time change is important. In the other case
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