Production Costs, Congestion, Scope and Scale Economies in Urban Bus Transportation Corridors

Document Type

Journal Article

Publication Date


Subject Area

operations - traffic, ridership - demand, policy - congestion, economics - economies of scale, place - urban, mode - bus


Urban transportation, Travel models (Travel demand), Travel demand, Traffic congestion, Production, Peak periods, Off peak periods, Motor bus transportation, Microeconomics, Intracity transportation, Intercity bus transportation, Gridlock (Traffic), Economies of scope, Economies of scale, Economic models, Costs, Bus transportation, Bus lines


This paper examines the main characteristics of production costs of urban bus transportation services by developing a microeconomic cost model that considers only the factors provided by bus operators. A multiproduct formulation is used that regards trips during peak and off peak periods as different products. The influence of the demand structure and congestion in the production of trips are considered in the analysis. Production and cost functions are specified using a fix proportion technology. The characteristics of scale and scope economies are studied with and without congestion. A numerical example is presented to illustrate the results. It was found that in the short run the existence of fixed costs produce ray scale economies. For a given fleet, the degree of these ray scale economies will increase with the magnitude of fixed costs and will decrease when the level of total production increases. In the long run, economies of scale are produced only by administration fixed expenditures, which can also increase more proportionally than production after some production level. Without congestion, there are constant product-specific returns to scale for trips produced in all non-peak periods. However, there are product specific diseconomies for the peak period.


Transportation Research Part A Home Page: