Stochastic cost frontier functions for different cost components based on data from 51 fast-craft routes in Norway in 1994 are estimated in order to design a cost norms system for the fast-craft operations and to calculate the industry’s potential efficiency improvements. The analysis is based on a stochastic cost frontier approach and on the assumption that inefficiency among the routes is half normally distributed. Our analysis shows substantial variations in input costs between routes. In summary, the results indicate that the potential for long-term improvement in the efficiency of Norwegian fast-craft operations is approximately 40 percent. Our model is a first attempt to implement a cost norms system for the fast-craft service in Norway aiming to make it easier to distribute subsidies for the various routes.
Skrevet av Gisle Solvoll, Finn Jørgensen