Chapter 19: Cost Functions in Transport

Knowledge of cost functions is essential for decision-making of transport companies and regulators of the public sector. Without such knowledge, decisions of transport firms on pricing, frequency of service, size of vehicles, investment levels, network structure, etc. will easily lead to bad results in terms of the firm's objectives. Also the public sector has reason to be interested in cost functions: cost functions have important implications for policies such as whether or not transport modes might qualify for subsidies by the public sector, and whether the public sector should take special regulatory measures in transport markets to counter monopolistic tendencies.