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

European Regional Science Association ___________________________________________________ August, 2003

this model an analysis of travel time savings conversion into transport time savings.
Such analysis is however beyond the scope of present article.

5. Conclusion and further comments.

In this contribution we have shown, using Marshallian definition of the surplus, that
standard practice in the valuation of freight travel time savings does not capture the full
benefits that occur in freight markets. Extra benefits due to shift in demand function
should also be taken into account. Additivity can be implemented when one considers
adding surplus that relate to a univocally defined categorisation of surplus, but can be
misleading when one wants to add benefits that come from different categorisations.
Simplifying assumption can however be used to make additivity problem workable.
When one assumes that the shift in supply function reflects completely the change in
transport services cost, and that supply function is not altered by any other economic
phenomenon, one can add shippers value for travel time savings to transport production
cost economies.

One needs however to recognise that the magnitude of the extra benefits to take into
account may not be considerable. Moreover, one should recognise that the addition of
shippers value of time savings to other benefits has to take into account the discrepancy
between travel time and transport time savings. This point probably needs to receive
extra attention.

Eventually one should recognise that more and more premium is put by shippers not
only on travel time savings but on reliability. This raises other interrogations that go
beyond the scope of this article but certainly deserve attention in future research.

6. Reference

Baumol, W.J. et al, 1970, An inventory Theory Model of freight Transport Demand,
Management science, 16, pp. 413-421.

Bureau of Transport and Regional Economics (BTRE), 1999, Facts And Furphies in
Benefit cost analysis : transport, report n 100, Canberra.

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