Essays on the economic efficiency of car ferry crossings

Abstract

Norway maintains a large network of ferries that provide connections across fjords and to islands without road access. Ferries provide accessibility but they also entail costs for the users and the operators involved, such as waiting time costs and labour costs, etc. In an economic sense, it is essential to provide an efficient production of services and select a level of service that yields the largest economic benefit, considering both the cost of users and operators of the service. Thus, both organizational reforms that may promote efficiency in the production and methods which enables assessment of economically optimal service levels are of interest. The literature on transport economics is scant with respect to ferries. In particular, the optimization of service levels does not consider the specific costs of users and operators in the ferry sector and is limited to a subset of the relevant decision variables. Further, the literature on organizational reforms to promote efficiency in the production of services, is scant when it comes to ferry operations. This thesis contains four papers that discuss the potential for improving the economic efficiency at car ferry crossings. Two main lines of enquiry are pursued. Firstly, the potential for increased effectiveness by use of Competitive Tendering (CT) is examined. An econometric study based on cost and operational data from Norwegian car ferry crossings is performed. Results show that CT may increase the operational efficiency, by reducing costs. However, the long-term impacts are unknown and should be considered in future work. Secondly, the potential for increased efficiency by selecting economically optimal service levels are investigated in three papers. Two of the papers develop methods to estimate user costs that are specific to ferry transportation. The aim is to develop tools that may be of use when selecting the optimal capacity and service levels of crossings. The methods are applied to case studies of Norwegian crossings. Results show, firstly, that too much capacity is offered and secondly, that the methods used to estimate user costs could be improved even further. One paper considers wider costs of operating a ferry service through accident costs. It considers whether altering the frequency of a car ferry service could affect the speed of motorists traveling to it. A theoretical model is developed, and a simulation study is performed. Results show that the effect is generally complex. However, it is established that increasing frequency from low levels may increase risky behaviour of motorists. The thesis recommends that empirical studies are performed, possibly using the theoretical model as an interpretative framework. The results from this thesis demonstrate that there is a potential for increasing the economic efficiency in the operation of car ferry crossings. It is argued that the largest benefit is most likely derived from optimizing service levels, and that the effects of organizational reforms (such as competitive tendering) may be limited. Further, it recommends that more effort is put into developing models of user costs associated with ferry operations, in particular those related to insufficient capacity and understanding the long-term effects of competitive tendering on cost efficiency.