Benefits of travel time savings for freight transportation : beyond the costs



European Regional Science Association ___________________________________________________ August, 2003

The surpluses defined by the side of the market it originates from : demand or
supply curves ;

The surpluses defined by the nature of the economic change it originates from : time
depending transport production costs savings or the surplus related to other
economic effects.

The surpluses defined in relation with the agent it accrues to : shippers or transport
operators.

The important thing here is that additivity holds only inside each of these
categories, but is misleading, unless specific assumption are made, when one wants to
add surpluses measures based on several categorisations. As can be seen on the graphs
above, surplus of the shippers can be added to surplus of the transport operator, the
surplus due to demand shift can be added to the surplus due to the supply shift, the
surplus linked with transport service production cost can be added to the surplus linked
to other phenomenon, but addition of one of these terms to the term of another category
is misleading.

One can also note that additivity holds under general conditions and also in
particular cases, for instance when competitive conditions are so that the transport
operators have to transmit all the production cost decrease to their clients, or when the
supply curve is a horizontal. If those two conditions combine the transport operator
surplus can tend toward 0 and all surplus is shipper surplus.

4. Quantification of extra benefits.

Once established the existence of such extra benefits, one needs to assess their
magnitude. There are two questions here, how to measure these extra benefits ? and
what is their likely magnitude ?

4.1 How to measure extra benefits ?

Regarding the measurement problem, each of the above listed categorisation of the
surplus could be used to measure these extra benefits, but some of these decomposition
could not provide workable approach. For instance, a direct way would be (i) to
measure all the benefits that are not linked with time depending transportation costs. But
the difficulty is that unless more assumptions are made, it is a very uncertain task to sort

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