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

European Regional Science Association ___________________________________________________ August, 2003

One can note that the cost function is truncated at the left representing the fact that
some speeds are not available to the hauliers.

We find that in other countries the valuation of freight travel time savings is also
based on transportation production costs savings. This is the case in France and in other
European countries (a census of different evaluation practice in Europe can be found in
Euret (94)) On can also find the same kind of approach in international organisation like
Banque Européenne d'Investissement and the World Bank.

2.2 Surplus representation of production cost reduction.

Often this definition of cost based valuation is included in a surplus approach. One
should here recognise that surplus is in turn defined in a variety of ways, from the
original work by Dupuit to the more contemporaneous contribution of Allais, passing
through the milestones works of Marshall and Hicks. In the current paper we propose to
discuss benefits based on the conventional Marshallian definition of surplus. We
recognise that there could be a discussion on whether this Marshallian surplus is the best
measure of benefits occurring thanks to infrastructure improvement. but for theoretical
clarification purpose it seems better to separate the question on the best benefit
measurement criteria and the question that is here in discussion about whether some
benefits are not captured by current COBA practice.

One can represent the Marshallian surplus associated with travel time savings
corresponding to the usual COBA practice. Figure 2 represents the Marshallian surplus
(or actually the change in surplus) associated with the shift in the supply curve of freight
transportation, where the ordinates q are the quantity of freight passing through the
infrastructure, and p is the price paid for the transportation of the shipment. Note that p
is not the generalised cost but only the monetary cost for transporting the freight.

The greyed area represents the term : q1*(c1-c2) + (q2-q1) * (c1-c2)/2. Where :

• q1 is the quantity of freight transported without the project;

• q2 is the quantity of freight with the project;

• c1 is the transportation production cost without the project;

• c2 is the transportation production cost with the project.

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