Optimal Vehicle Size, Haulage Length, and the Structure of Transport Costs

provided by Research Papers in Economics

Paper presented to the European Regional Science Association Congress,
Vienna

August 1998

Optimal Vehicle Size, Haulage Length and the Structure of Distance-
Transport Costs

Philip McCann
Department of Economics
University of Reading
ENGLAND

RG6 6AW

Abstract

This paper deals with two interrelated questions, namely the optimum size of a vehicle or vessel, and
the structure of transport costs with respect to haulage distance. The relationship between these two
questions has not been coherently dealt with previously in the literature, and the heuristic attempts at
doing so, have lead to both theoretical and empirical anomalies. This paper adopts an inventory
optimisation approach in order to show that both of these questions can be treated in a unified manner
and this allows us to show, first, that under very general conditions the optimum size of a ship increases
with the haulage distance and haulage weight, and second, that the observed structure of transport costs
with respect to the haulage distance and quantity is itself a result of this optimisation problem.

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