Bet big on doubles, bet smaller on triples. Exploring scope economies in multi-service passenger transport companies

Abstract

In this paper, using a sample of Italian bus and coach operators, we investigate the presence and the magnitude of scale and scope economies in the provision of passenger transport services. The estimates of a Composite Cost Function econometric model highlight the presence of global scope and scale economies only for multi-service operators (providing urban, intercity and for-hire bus and coach transport services) with output levels lower than the ones characterising the ‘average’ firm. This indicates that relatively small, specialized companies would benefit from cost reductions by evolving into multi-service firms providing urban, intercity and coach renting services. For operators of a bigger size, scope economies can be still exploited by linking urban and intercity services or by linking intercity services and coach renting, whereas the couple urban service-coach renting is associated with strong diseconomies of scope. Our results can help policymakers (that must define the boundaries of the service area to be tendered) and firms (that, as a result of the ongoing liberalization process, have increased opportunities to invest in regulated and non-regulated passenger transport activities) to make informed decisions.