Handbook of Research Methods and Applications in Transport Economics and Policy

Handbook of Research Methods and Applications in Transport Economics and Policy

Handbooks of Research Methods and Applications series

Edited by Chris Nash

Transport economics and policy analysis is a field which has seen major advances in methodology in recent decades, covering issues such as estimating cost functions, modelling of demand, dealing with externalities, examining industry ownership and structure, pricing and investment decisions and measuring economic impacts. This Handbook contains reviews of all these methods, with an emphasis on practical applications, commissioned from an international cast of experts in the field.

Chapter 3: Public transport operations costs

Andrew Smith, Phill Wheat and Michal Wolanski

Subjects: economics and finance, transport, environment, research methods in the environment, transport, research methods, research methods in economics, research methods in the environment, urban and regional studies, research methods in urban and regional studies, transport


Analysis of the cost structure of transportation operations serves many purposes. First there are the usual business accounting and management motivations. A business needs to understand its costs and in particular how they change with factors within or outside the control of managers. These methods are generally cost accounting in nature and, with some notable exceptions (for example, CIPFA bus costing formula; see Chartered Institute of Public Finance and Accountancy, 1974; Whelan et al., 2001; NERA, 2006), are not in the public domain. A second motivation, which is the subject of this chapter and in common with infrastructure cost analysis in the previous chapter, is for policy analysis. This includes establishing the scale, density and scope properties of transport operations to inform on, for example, the optimal industry structure. In many transportation operations (such as railways) this is a very topical subject given the trend towards vertical separation of transport undertakings into infrastructure and operations, with the former generally kept as monopolies due to scale economies, but the latter being more open to competition, typically via competitive tendering. Competitive tendering is also widely used as a means of introducing competition for the provision of bus services.

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