Distance, Modal Choice and Transport Cost

Different transportation modes have different cost functions according to the serviced distance. Road, rail and maritime transport have respectively a C1, C2 and C3 cost functions. While road has a lower cost function for short distances, its cost function climbs faster than rail and maritime cost functions. At a distance D1, it becomes more profitable to use rail transport than road transport while from a distance D2, maritime transport becomes more advantageous. Point D1 is generally located between 500 and 750 km of the point of departure while D2 is near 1,500 km. Although the above relation is rather straightforward, it does not fit reality well, mainly for the following reasons:

• It assumes that modal options are interchangeable. For many origins and destinations, modal options such as rail or maritime may not be present.
• Since rail and maritime transportation are discrete networks only accessible through a terminal, most locations will involve a road transportation segment, which changes the cost structure.

There are also regional differences impacting the breakeven distance. For Europe, due to higher market densities, the breakeven distance is in the range of 650 miles (1050 km) while in the United States it is around 750 miles (1,200 km). For the United States, only around 5% of the intermodal rail traffic concerns distances of less than 750 miles underlining the clear supremacy of trucking for such a service range. The average rail haul length is about 1,900 miles (3,050 km), with around 65% involving distances of more than 2,000 miles (3,200 km). Evidence from passenger transport also underline a similar distance-based behavior.