By K. J. Button, A.D. Pearman
ISBN-10: 1349041513
ISBN-13: 9781349041510
ISBN-10: 134904153X
ISBN-13: 9781349041534
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Additional info for The Economics of Urban Freight Transport
Example text
The second and related point to make is that all the analysis presented so far has been related to the firm which produces only a single output. If, however, a firm produces several outputs, sharing the services of some common inputs, difficult problems of cost allocation arise. The problem of joint and common costs occurs frequently in transport. Joint costs are incurred whenever the provision of some service necessarily requires the provision of another. For example, if a trainload of food is delivered to a city, then a return journey in the opposite direction must also be undertaken (assuming, for simplicity, that the train must return directly).
Assumption 2 A straightforward explanation of the derivatiOn of these properties can be found in Baumol (1972). In order to derive a consumer's demand curve, two further factors ECONOMIC THEORY OF URBAN FREIGHT TRANSPORT 25 have to be superimposed on the indifference-curve analysis. These are the consumer's income, and commodity prices. If we stay in a simple twocommodity world for the purposes of illustration, then income and prices will enter the problem in the form of a budget constraint which the consumer must obey: (Eq.
There is no guarantee that there will be matching demand for the reverse journey, but no cost saving is available by withdrawing the service. Common costs, on the other hand, are such that, if a given set of services is to be provided at all, then they must be incurred, but no one service necessarily requires the production of the others. For example, the provision of maintenance on a road between two places is necessary if it is to continue to be used imd the costs incurred will be common to all users, freight, passenger, local, inter-urban, etc.
The Economics of Urban Freight Transport by K. J. Button, A.D. Pearman
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