Instability and dynamic cost elasticities in freight transport systems

• Dynamic cost functions can cause instability in freight transport systems.
• There is a time threshold for the implementation of a plan of improvements.
• Dynamic cost elasticities tend to zero as costs decrease.
• The effects of successive plans of improvements diminish as costs decrease.

The paper studies two properties of freight transport systems with dynamic cost functions. The first property is that the dynamic cost functions can give rise to situations in which the transport system is unstable. This property has a number of consequences. One of them – important from a practical point of view – is that, if a transport mode implements a plan of improvements of its characteristics in order to stop the decline of the proportion of freight flow it carries, there is a time threshold to start the improvements, beyond which the plan is unsuccessful. The other property is that the dynamic cost functions give rise to cost elasticities that vary over time, with asymptotic values that tend to zero as transport cost decreases. This means that, if one implements successive improvements of the characteristics of a transport mode, their effects diminish progressively.