This paper shows technically that economies of transport network expansion should be
viewed through the concept of economies of scope rather than through the concept of
economies of scale. The generalization of the technical approach by Jara-Díaz (1982b,
2000) to a three nodes system presented here, has been instrumental to emphasize the
spatial nature of product and to illustrate, in a fairly precise manner, the process that leads a
cost minimizing transport firm to the optimization of the route structure as a key
endogenous decision. We have been particularly keen on the distinction between what is
truly exogenous to the firm – the OD structure of demand, network topology and links
description – from what is an endogenous decision as the route structure (service structure
and link sequence), showing how the optimal operation of a firm changes as the exogenous
variables change. This is a particularly relevant aspect, as all these network related concepts
have been treated in a somewhat confusing manner in the empirical work. For example,
several variables have been used to describe the network (number of points served, number
of route miles, even average length of haul), or the same network descriptor (number of
route miles) has been defined in different ways, either as the total miles of the physical
network or the number of miles actually used.