ON CALCULATING COST ELASTICITIES

Output aggregation in transportation cost studies has led to the use of output quality or attribute variables. Because some of these variables contain the definition of output, concern has arisen over the interpretation or calculation of their cost elasticities. This paper discusses the typical calculation of cost elasticities and the merits of a definitional approach for certain output quality variables. Then, the authors suggest a different method for calculating the full effect of any variable on costs. Although the discussion focuses on trucking, it applies to any similar cost estimation.