Trucking Costs: Comparison Between Econometric Estimation and Cost Accounting

This paper discusses the results of a comparative analysis of two alternative approaches to the estimation of cost functions: econometric modeling, and cost accounting. The analyses reveal that both approaches exhibit similar performance in their ability to estimate the stated costs. In both cases, they provide relatively good estimates of costs in the range of $100 to $300, and poor estimates of the lower and higher ends of costs. The authors conclude that best approach is determined by the circumstances surrounding the application, most notably, the objectives and constraints of the analyses. In cases, where it is possible to gather a large quality dataset on costs, or where accurate estimates are required, econometric modeling is undoubtedly the best alternative. In all other conditions, the cost-accounting approach may work as well, at a significantly lower cost.