Economies of scale and scope in local public transportation
Mehdi Farsi
Aurelio Fetz
Massimo Filippini
Department of Management, Technology and Economics, ETH Zurich
and
Department of economics, University of Lugano
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.
