As transport activities mean displacement of individuals and goods in both time and space, the analysis of transport production involves the assignment of resources to generate trips among many different points in space during many different periods. As a consequence, the microeconomic analysis of transport production is far from a simple extension of the theory of the firm. Particularly, the concepts of scale and scope acquire very specialised meanings. In this paper the notions of economies of scale and scope in transport activities are presented, as understood using a precise definition, of transport output i.e. a vector of flows in a transport network. Then the problems are identified that arise due to the use of aggregates within the specification of transport cost functions. The approaches reported in the literature to overcome the ambiguity introduced by aggregates are reviewed. Then an interpretation is made of the concepts of economies of scale, density and scope within the context of transport cost functions with aggregate output indices. Particular emphasis is placed on the unsolved problem of measuring scope from aggregates.
Abstract