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Railroad Pricing and Revenue-to-Cost Margins in the Post-Staggers Era

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  • Ivaldi, Marc
  • McCullough, Gerard

Abstract

The aim of this paper is to look more carefully at the structure of rail rates that has evolved in the 25-year period since the Staggers Rail Act and to assess its impact on the railroad industry. The paper does this by investigating the relationship between car-type-specific marginal costs and car-type-specific rates. These define a set of Lerner indices that are the traditional economic measure of pricing behavior. Taken individually, the Lerner indices are a measure of the market conditions that railroads confront in commodity-specific markets. Taken together in combination with aggregate output measures, the Lerner indices help to determine whether railroad revenues are adequate to cover rail costs. Comparing the ratio of total annual revenues received by each Class I railroad to total (econometrically) estimated costs, we find that this ratio has averaged less than 1.06 in the 23-year period between 1981 and 2004.

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  • Ivaldi, Marc & McCullough, Gerard, 2007. "Railroad Pricing and Revenue-to-Cost Margins in the Post-Staggers Era," Research in Transportation Economics, Elsevier, vol. 20(1), pages 153-178, January.
    • Handle: RePEc:eee:retrec:v:20:y:2007:i:1:p:153-178
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    4. Leonardo J. Basso & Sergio R. Jara-Díaz & William G. Waters, 2011. "Cost Functions for Transport Firms," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 12, Edward Elgar Publishing.
    5. Laroche, Florent & Sys, Christa & Vanelslander, Thierry & Van de Voorde, Eddy, 2017. "Imperfect competition in a network industry: The case of the European rail freight market," Transport Policy, Elsevier, vol. 58(C), pages 53-61.
    6. Anupriya, & Graham, Daniel J. & Carbo, Jose M. & Anderson, Richard J. & Bansal, Prateek, 2020. "Understanding the costs of urban rail transport operations," Transportation Research Part B: Methodological, Elsevier, vol. 138(C), pages 292-316.
    7. Zofío, Jose L. & Condeço-Melhorado, Ana M. & Maroto-Sánchez, Andrés & Gutiérrez, Javier, 2014. "Generalized transport costs and index numbers: A geographical analysis of economic and infrastructure fundamentals," Transportation Research Part A: Policy and Practice, Elsevier, vol. 67(C), pages 141-157.
    8. Waters II, William G., 2007. "Evolution of Railroad Economics," Research in Transportation Economics, Elsevier, vol. 20(1), pages 11-67, January.
    9. Li, Hongchang & Yu, Kemei & Wang, Kun & Zhang, Anming, 2019. "Market power and its determinants in the Chinese railway industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 120(C), pages 261-276.
    10. Zofío, José Luis & Condeço-Melhorado, Ana M. & Maroto-Sánchez, Andrés & Gutiérrez, Javier, 2011. "Decomposing generalized transport costs using index numbers: A geographical analysis of economic and infrastructure fundamentals," Working Papers in Economic Theory 2011/06, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    11. Bitzan, John D. & Karanki, Fecri, 2022. "Costs, density economies, and differential pricing in the U.S. railroad industry," Transport Policy, Elsevier, vol. 119(C), pages 67-77.

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