A survey of recent developments in transportation cost function research

• Published in: The Logistics and transportation review Vol. 32; no. 4; p. 423
• Main Authors: Oum, Tae Hoon, Waters, W G
• Format: Journal Article
• Language: English
• Published: Vancouver University of British Columbia, Faculty of Commerce and Business Administration 01.12.1996
• Subjects: Cost analysis; Cost estimates; Costs; Decision making; Economic justification; Economies of scale; Efficiency; Productivity; Railroads; Studies; Transportation industry; United States > US
• ISSN: 0047-4991

The origins of empirical cost analysis in transportation is reviewed, but concentration is on developments over the last 15 years or so. Aggregate cost functions are studied to infer broad cost characteristics of the industry, notably the presence or absence of economies of scale or density. Recently the calculation of scale economies is being reconsidered. If there are interactions among output categories and/or output attributes associated with firm size, there may be cost advantages to large firms but not comparisons across firms and/or over time. The cost function (or productivity index) is decomposed to identify the influence of scale, mix of outputs, output attributes, and characteristics of the market environment, to reveal residual efficiency differences. Other recent developments reviewed include: 1. the use of flexible functional forms, 2. output measurement, output attributes, and hedonic functions, 3. the treatment of fixed inputs in short run cost functions, and 4. the use of frontier estimation techniques.