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Do the Usual Results of Railway Returns to Scale and Density Hold in the Case of Heterogeneity in Outputs? A Hedonic Cost Function Approach

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  • Phill Wheat
  • Andrew S. J. Smith

Abstract

This paper highlights the importance of modelling the interaction between returns to scale/density and heterogeneity of services when evaluating optimal size and structure of passenger rail operations. We propose and estimate a hedonic cost function which allows us to incorporate measures of train operator heterogeneity, which are central to evaluating the cost effect of merging heterogeneous train operators, and thus informing policy. We illustrate our model via three rail franchise mergers/remappings in Britain, and show that the wrong policy conclusion result could be obtained by only considering the scale and density properties, in isolation from heterogeneity. © 2015 LSE and the University of Bath

Suggested Citation

  • Phill Wheat & Andrew S. J. Smith, 2015. "Do the Usual Results of Railway Returns to Scale and Density Hold in the Case of Heterogeneity in Outputs? A Hedonic Cost Function Approach," Journal of Transport Economics and Policy, University of Bath, vol. 49(1), pages 35-57, January.
    • Handle: RePEc:tpe:jtecpo:v:49:y:2015:i:1:p:35-57
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    Citations

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    Cited by:

    1. Nash, Chris & Smith, Andrew, 2020. "Public transport procurement in Britain," Research in Transportation Economics, Elsevier, vol. 81(C).
    2. Broman, Emanuel & Eliasson, Jonas, 2019. "Welfare effects of open access competition on railway markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 129(C), pages 72-91.
    3. Smith, Andrew S.J. & Ojeda Cabral, Manuel, 2022. "Is higher quality always costly? Marginal costs of quality: Theory and application to railway punctuality," Transportation Research Part A: Policy and Practice, Elsevier, vol. 157(C), pages 258-273.
    4. Christian Desmaris & Guillaume Monchambert, 2021. "Regional Passenger Rail Efficiency: Measurement and Explanation in the case of France," Working Papers halshs-03118747, HAL.
    5. Cherbonnier Frédéric & Ivaldi Marc & Muller-Vibes Catherine & Van Der Straeten Karine, 2017. "Competition For Versus In the Market of Long-Distance Passenger Rail Services," Review of Network Economics, De Gruyter, vol. 16(2), pages 203-238, June.
    6. Yu, Kemei & Wu, Jianhong & Wang, Kun & Zhang, Anming & Zheng, Shiyuan & Wang, Yixiao & Li, Hongchang, 2023. "Restructuring Chinese railways from a cost-efficient perspective—A hedonic cost function analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 177(C).
    7. de Rus Ginés & Socorro M. Pilar, 2017. "Planning, Evaluation and Financing of Transport Infrastructures: Rethinking the Basics," Review of Network Economics, De Gruyter, vol. 16(2), pages 143-160, June.
    8. Phill Wheat & Alexander D. Stead & Yue Huang & Andrew Smith, 2019. "Lowering Transport Costs and Prices by Competition: Regulatory and Institutional Reforms in Low Income Countries," Sustainability, MDPI, vol. 11(21), pages 1-19, October.
    9. Christian Desmaris & Guillaume Monchambert, 2021. "Regional Passenger Rail Efficiency: Measurement and Explanation in the case of France," Post-Print halshs-03118747, HAL.
    10. Preston, John, 2018. "The wheels keep on turning: Is the end of rail franchising in Britain in sight?," Research in Transportation Economics, Elsevier, vol. 69(C), pages 187-196.
    11. Wheat, Phill & Smith, Andrew S.J. & Rasmussen, Torris, 2018. "Can competition for and in the market co-exist in terms of delivering cost efficient services? Evidence from open access train operators and their franchised counterparts in Britain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 114-124.
    12. Brand, Christina & Sieg, Gernot, 2022. "An integral interval timetable for long-distance passenger rail services: Time to reconsider targeting on-track competition," Economics of Transportation, Elsevier, vol. 32(C).
    13. Bitzan, John D. & Karanki, Fecri, 2022. "Costs, density economies, and differential pricing in the U.S. railroad industry," Transport Policy, Elsevier, vol. 119(C), pages 67-77.

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