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Pricing behavior in the deregulated motor carrier industry; an empirical investigation
Bibliographic section
263
P r i c i n g Behavior in the Deregulated Motor Carrier Industry; An E m p i r i c a l Investigation, Harwood Hoover, Jr., 1984, UMI AAD85-07502 (Dissertation at Michigan State University). The Motor Carder Act of 1980 allowed motor carders substantial new pricing freedoms, and reduced constraints upon market entry. This act culminated a period of academic and political debate concerning the outcomes of such a substantial policy change. A central theoretical issue in this debate was the applicability of the competitive economic model. Strong arguments were made to the effect that all segments of the industry would not, in fact, respond competitively. Less than truckload carders, operationalized as carders of general commodities with substantial terminal investments, might be expected to react with increasing concentration and eventual departure from competitive pricing behavior. This research examined whether or not the pricing behavior of this carder group was conforming to specific competitive expectations. The conformity of carrier behavior to the expectations of the Stigler theory of economic regulation was also examined. The Stigler theory would expect that regulation benefited, and therefore was supported by, the carders. To examine carder pricing behavior, a mail survey
was conducted with presidents of firms in the identified carder group. Seven hundred and thirty-two presidents of regular route common carders of general commodities were surveyed. One hundred and eighty-five useful responses were subjected to data analysis. This carder group was found to be making greater use of tariffs than of contracts, but to be individualizing their rate behavior through the use of special tariffs or special items aimed at one or a few shippers. Carriers were engaging in discounting, and reported changes in their revenue cost relationships such that prices were closer to costs. The cross subsidy situation was reported to be changing, but the carder group reported that the cross subsidy of shipments which were losing money prior to deregulation continues. They also report that powerful shippers are negotiating prices closer to the carders costs than other shippers have been able to do. Carriers are innovating by adopting certain marketing perspectives and by adding service to new geographic areas. Substantial heterogeneity of pricing behavior was documented, and support for the Stigler perspective was found.
Railroads
Modeling Change in a C o m m o d i t y F l o w S y s t e m : A n E x a m i n a t i o n of United S t a t e s Rail F r e i g h t Flows, 1972-1981, Daniel Curtis Knudsen, 1984, UMI AAD84-22810 (Dissertation at Indiana University). This dissertation investigates changes in interstate rail freight flows within the United States across the period 1972-1981. Hypotheses about possible bases of change in the pattern of interstate flows are first generated within a spatial price equilibrium framework. These hypotheses are then operationalized as a hierarchial set of models representing inertia, variations in regional imports and exports, and variations in generalized transport cost using Kullback-Leibler estimation. Distribution-free significance tests are used in the hypothesis testing phases of the research. Results of the research indicate that change in rail freight flows is typically significant in both the long run and the short run. The significance of long run change is suggestive of the long run relocation of supply and
demand, and regional differences in the formation and closure of industry. The significance of short run change indicates short run realignment of regional trading partners, possibly in response to variations in macroeconomic conditions. Variations in regional imports and exports are found to be the dominent source of change in commodity flows, while variations in generalized interregional transport cost are of considerably less importance. The models used in the research are among the most powerful of available spatial interaction models, but are found to perform poorly in several instances. This suggests that careful consideration of available prior information is crucial to modeling, and that further specifications of these models may be necessary.
The Cost Structure of United States Railroad Industry, 1980-81, Tenpao Lee, 1984, UMI AAD84-23647 (Dissertation at Iowa State University). The proposed Coal Rate Guidelines published by the Interstate Commerce Commission imply that the railroad industry can raise rates on the so-called "captive" coal to achieve the goal of revenue adequacy. Revenue adequacy is defined as a level of earnings sufficient to enable a carder to meet all of its expenses, retire a reasonable amount of debt, cover plant depreciation and obsolescence, and earn a return on investment adequate to attract new capital. If the proposed Coal Rate Guidelines are implemented on coal traffic, it is expected that similar
guidelines will be applied to other so-called "captive" commodities, such as grains, fertilizers, chemicals, and agricultural products. The proposed Guidelines emphasize the inelastic demand for railroad transportation of "captive" coal, but ignore the cost side and the structures of the railroad industry as a crucial part in achieving railroad revenue adequacy. To estimate the potential in achieving the goal of revenue adequacy of the railroad industry from a cost saving point of view, two flexible functional forms, the translog
263
P r i c i n g Behavior in the Deregulated Motor Carrier Industry; An E m p i r i c a l Investigation, Harwood Hoover, Jr., 1984, UMI AAD85-07502 (Dissertation at Michigan State University). The Motor Carder Act of 1980 allowed motor carders substantial new pricing freedoms, and reduced constraints upon market entry. This act culminated a period of academic and political debate concerning the outcomes of such a substantial policy change. A central theoretical issue in this debate was the applicability of the competitive economic model. Strong arguments were made to the effect that all segments of the industry would not, in fact, respond competitively. Less than truckload carders, operationalized as carders of general commodities with substantial terminal investments, might be expected to react with increasing concentration and eventual departure from competitive pricing behavior. This research examined whether or not the pricing behavior of this carder group was conforming to specific competitive expectations. The conformity of carrier behavior to the expectations of the Stigler theory of economic regulation was also examined. The Stigler theory would expect that regulation benefited, and therefore was supported by, the carders. To examine carder pricing behavior, a mail survey
was conducted with presidents of firms in the identified carder group. Seven hundred and thirty-two presidents of regular route common carders of general commodities were surveyed. One hundred and eighty-five useful responses were subjected to data analysis. This carder group was found to be making greater use of tariffs than of contracts, but to be individualizing their rate behavior through the use of special tariffs or special items aimed at one or a few shippers. Carriers were engaging in discounting, and reported changes in their revenue cost relationships such that prices were closer to costs. The cross subsidy situation was reported to be changing, but the carder group reported that the cross subsidy of shipments which were losing money prior to deregulation continues. They also report that powerful shippers are negotiating prices closer to the carders costs than other shippers have been able to do. Carriers are innovating by adopting certain marketing perspectives and by adding service to new geographic areas. Substantial heterogeneity of pricing behavior was documented, and support for the Stigler perspective was found.
Railroads
Modeling Change in a C o m m o d i t y F l o w S y s t e m : A n E x a m i n a t i o n of United S t a t e s Rail F r e i g h t Flows, 1972-1981, Daniel Curtis Knudsen, 1984, UMI AAD84-22810 (Dissertation at Indiana University). This dissertation investigates changes in interstate rail freight flows within the United States across the period 1972-1981. Hypotheses about possible bases of change in the pattern of interstate flows are first generated within a spatial price equilibrium framework. These hypotheses are then operationalized as a hierarchial set of models representing inertia, variations in regional imports and exports, and variations in generalized transport cost using Kullback-Leibler estimation. Distribution-free significance tests are used in the hypothesis testing phases of the research. Results of the research indicate that change in rail freight flows is typically significant in both the long run and the short run. The significance of long run change is suggestive of the long run relocation of supply and
demand, and regional differences in the formation and closure of industry. The significance of short run change indicates short run realignment of regional trading partners, possibly in response to variations in macroeconomic conditions. Variations in regional imports and exports are found to be the dominent source of change in commodity flows, while variations in generalized interregional transport cost are of considerably less importance. The models used in the research are among the most powerful of available spatial interaction models, but are found to perform poorly in several instances. This suggests that careful consideration of available prior information is crucial to modeling, and that further specifications of these models may be necessary.
The Cost Structure of United States Railroad Industry, 1980-81, Tenpao Lee, 1984, UMI AAD84-23647 (Dissertation at Iowa State University). The proposed Coal Rate Guidelines published by the Interstate Commerce Commission imply that the railroad industry can raise rates on the so-called "captive" coal to achieve the goal of revenue adequacy. Revenue adequacy is defined as a level of earnings sufficient to enable a carder to meet all of its expenses, retire a reasonable amount of debt, cover plant depreciation and obsolescence, and earn a return on investment adequate to attract new capital. If the proposed Coal Rate Guidelines are implemented on coal traffic, it is expected that similar
guidelines will be applied to other so-called "captive" commodities, such as grains, fertilizers, chemicals, and agricultural products. The proposed Guidelines emphasize the inelastic demand for railroad transportation of "captive" coal, but ignore the cost side and the structures of the railroad industry as a crucial part in achieving railroad revenue adequacy. To estimate the potential in achieving the goal of revenue adequacy of the railroad industry from a cost saving point of view, two flexible functional forms, the translog