European Regional Science Association ___________________________________________________ August, 2003
the effect of time saving on cost, will be to allow substitution of more time to other
priced input in the production process. This means that in some occurrences the shipper
can prefer to have his good leaving its factory latter, because, taking advantage of this
extra delay, he will be able to use cheaper production combination. One should however
recognise that such trade off between production costs and goods departure time is
likely to happen only when production is made on request or when the producer is
facing demand whose quantity is not constant over time. As pointed out by Baumol and
Vinod (70), when a firm faces a constant demand and when the good is similar from a
shipment to another, then transportation time has no impact on costs and revenues for
both the firm and its client, and cost minimising will prevail in the choice of
transportation services. In other occurrences however the producer will be able to make
trade off between time and cost in the choice of the haulier.
Second, shippers revenues are correlated with transportation service duration. This
is mainly due to the fact that shippers can provide their customer with time benefits. The
shipper who uses faster transportation can provide his client faster and provide them
more satisfaction if they attach importance to these time dimensions of the good. The
willingness to pay of the shipper will partly reflect the willingness to pay of its clients.
This can be the case for instance when final customers utility function is sensitive to the
time at which goods are available. This will then be reflected in consumers willingness
to pay for faster transportation and, if the shipper has to pay for the transport, in the
shippers willingness to pay for faster transportation. Eventually this can pass through
different intermediates that deal with the good between the shipper and the final
customer. Time depending revenues of the shipper can also be linked with the cost of an
intermediate recipient firm. If the cost of these firm are increasing with arrival time at
destination, extra revenues can be gained by the shipper when time savings occur.
3.3 The issue of double counting.
There should be here a case to consider more carefully the issue of double counting.
We think that the main source of misunderstanding about the question of additivity of
demander and suppliers valuation of time savings comes from the confusion of different
categorisations:
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