Edited by Chris Nash
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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