AØKK08134U Seminar: Transportation Economics

Topics:

1. Transportation demand: Transportation is a derive demand, derived from a desire to consume some good or service at a location that differs from where the good or service is produced. The seminar provides a mainstream treatment of transportation demand, including both aggregate and disaggregate (discrete choice) approaches.
2. Firm production and cost in transportation: The discussion of costs includes accounting, engineering, and economic methods of cost estimating, and consideration of congestion and other externalities, which are important for understanding and developing welfare-maximizing prices. The seminar develops the basic constructs which make up the theories of long-run and short-run firm production and cost in a competitive environment. A number of empirical studies are available that have estimated input substitution and factor demand characteristics of various transportation firms. The seminar also includes discussion of economies of scale, which are especially important for public transport.
3. Efficiency in transportation: What determines the level at which transport firm actually does produce? The answer to this question depends, at least partly, on whether the firm operates in a perfectly or imperfectly competitive structure. Regulation, deregulation, and efficiency in transportation can be analyzed as well. Transportation economists have had a major effect on policy, and the trend toward modal deregulation and privatization is due to lessons from transportation economics.
4. Transportation investment: Transportation companies routinely invest in capital equipment and infrastructure.
5. Welfare effects of public-sector pricing and investment: The theme on transport pricing considers the idea of first-best and second-best (how to optimize when dealing with a suboptimal world), which is conceptually important for making economics relevant to policy.
6. Congestion pricing: Introducing congestion in the analysis raises a number of interesting questions. For example, do we want to eliminate congestion, or is there an optimal level of congestion on transportation networks? Significant attention is paid to getting the correct technical (engineering) model for economic congestion cost functions. Choosing unrealistic technological functions for use in models of road pricing has historically been a major weakness of transportation economics, and the attempts to rectify it are moving in the correct direction.
7. Transportation and land use in urban areas: The role that transportation plays in the spatial development of urban areas is of great interest. The focus here is on the question of where consumption or production occurs, instead of the question of how much to consume and produce. In order to answer this question, a monocentric theory of residential an employment location can be applied.

Students are encouraged to write papers in pairs. Ideas for papers:

• the demand for gasoline, regulation and automobile demand,
• household demand for vehicle ownership,
• monopoly rent-sharing in the motor carrier industry,
• optimal pricing and investment in rail transport;
• congestion pricing,
• labour supply and commuting,
• CBA in transport sector, etc.

For successful completion of the seminar, the student demonstrates a reasonable insight into the underlying economic issues in the transportation sector, is able to draw on basic modeling frameworks in analyzing such problems, and presents a discussion of these issues in a fairly clear and organized way. The very good student demonstrates a deep understanding of the theoretical models, and is able to connect, combine or adapt general ideas and concepts to specific transportation economic problems under consideration. The seminar therefore provides the student with a good foundation for administrative and analytical positions in various organizations in the transportation sector.