Spatial Competition of Two-level Hierarchical Transportation Systems under Economies of Scale in Transportation Cost

In this short paper, we consider how the hierarchical structure in transportation, in which goods are transported from demand points to nearby terminal stations in the first level of hierarchy and from station to station in the second, emerges in competition between transportation companies having economies of scale in volume and distance. We conmpare the competitive and planning locations of terminal stations of the hierarchical system using a Hotelling-style spatial competition model (1929). We find that a competitive location can be generated in an area where the planning location can never be generated. We also find no difference between the two when point-to-point transportation is replaced by transportation in bulk.