Pii: S1361-9209(97)00037-0

ÐIn this paper we review the theoretical and empirical literature on the cost structure of the provision of intercity highway transportation and specify and estimate our own cost functions. We develop a full cost model which identi®es the key cost components and then estimate costs component by component: user costs, infrastructure costs, time and congestion costs, noise costs, accident costs, and pollution costs. The total long run average cost is $0.34 per vehicle km traveled. The single largest cost category is free ̄ow travel time. While the marginal cost of infrastructure is higher than its average cost, indicating that new construction is increasingly expensive, the marginal cost of driving (user ®xed and variable costs) is less than the average cost, indicating that by increasing travel the user can spread his ®xed cost of a vehicle over more trips without penalty. # 1998 Elsevier Science Ltd. All rights reserved