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

European Regional Science Association ___________________________________________________ August, 2003

Figure 3 : surplus related to transportation cost reduction.

Eventually, one should note that the freight transportation market has some
peculiarities that may make the representation of surplus a bit more specific. It is likely
that hauliers supply function is horizontal due to: (i) in medium and long term , the
supplied quantities are perfectly elastic to the demand, and (ii) low differentiation of
technological conditions among suppliers. Saying this we do not mean that there is one
unique technology among suppliers to provide transport from one location to another.
Segments exists among transport for instance : frozen transportation, container
transportation, bulk transportation^ but it still holds true that in each of these segments
their are no likely durable production cost differentials when traded quantities increase.
In these conditions, the shift of horizontal supply will transmit the full benefits of cost
decrease to the shippers. But still this surplus will only be the counter part of cost
changes and will not reflect other possible changes.

Moreover, the traditional representation is approximately correct in the situation
where suppliers would shift their supply function only from a fraction of the reduction
of production cost. In the latest situation, suppose the induced traffic is correctly
estimated, the usual surplus measure estimates correctly the actual surplus for pre-
existing traffic, but the rule of half can slightly overestimate the surplus on induced
traffic. However such overestimates may be of limited importance if, as is the case in

<<   5   6   7   8   9   10   11   >>

More intriguing information