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 increases 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:
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.
- It assumes that modal options are interchangeable. For many
origins and destinations, modal options such as rail or maritime
may not be present and thus cannot be considered as an option.
- 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.