Analysis of transportation network structure of hub-and-spoke: an economic perspective

This paper explains the economic rationale for adopting Hub-and-Spoke structure in transport networks. Hub-and-spoke and Fully-Connected are two fundamental types of transport network structure. The reason for adopting one structure instead of the other in some cases is that it has certain economic benefits over the other. On the basis of a discussion on the concept of economies of scale/density/scope in transport, a comparative analysis has been made on the transport costs and the economies of scale/density/scope indexes between the Hub-and-Spoke and the Fully-Connected structure in transport network. We argue that the stimulation for adopting the network structure of Hub-and-Spoke is to exploit the economies of traffic density and the precondition for such exploitation is there exist the economies of scope.