Economies of scale in networks

Marvin Kraus

Journal of Urban Economics, 2008, vol. 64, issue 1, 171-177

Abstract: A network's capacity can typically be increased in a variety of ways. For example, in a highway network, existing roads can be made wider or new roads added. This paper is concerned with the determination of the degree of local economies of scale in the cost function for the outputs of a congestible network when there are multiple margins for making adjustments to capacity. The main result is that under the provision of a cost-minimizing network--one for which the sum of user and capacity costs for the network's outputs is at a minimum--the degree of local economies of scale in the cost function for the network's outputs is the same along all margins for adjusting capacity. This includes what routes to establish.

Keywords: Networks; Congestion; Economies; of; scale; Congestion; pricing (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:64:y:2008:i:1:p:171-177

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