Economies of scale and scope in local public transportation

Abstract

The purpose of this study is to analyze the cost structure of a sample of Swiss multi-modal urban transport operators in order to assess economies of scale and scope. The results suggest that the industry is characterized by increasing returns to scale and economies of scope. Several European countries have introduced a competitive tendering procedure in the assignment of franchised monopoly in the local transport industry. In the case of multi-modal systems the regulator has to decide to open the competitive tendering procedure for supplying the entire transport services or to unbundle the multi-modal systems and open separate tenders for different modes of transport. In order to make the decision the regulator should have information on the economies of scope. Only few studies have addressed the issue of scope economies in local transport systems.