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A Hedonic Cost Function Approach to Estimating Railroad Costs

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  • Bitzan, John D.
  • Wilson, Wesley W.

Abstract

This study estimates a hedonic railroad cost function. It allows for differences in marginal costs across different outputs with different shipment characteristics. Cost and shipment data are included to examine the elasticity of costs with respect to two outputs - unit train output and way & through train output. We find differences across these two measures, which suggest the use of aggregate output measures may lead to significant bias in cost elasticities. Moreover, our approach also allows the effects of different shipment characteristics (e.g., shipment size, average length of haul) on marginal cost of each output to be considered.

Suggested Citation

  • Bitzan, John D. & Wilson, Wesley W., 2007. "A Hedonic Cost Function Approach to Estimating Railroad Costs," Research in Transportation Economics, Elsevier, vol. 20(1), pages 69-95, January.
    • Handle: RePEc:eee:retrec:v:20:y:2007:i:1:p:69-95
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    References listed on IDEAS

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    1. MacDonald, James M., 1989. "Effects of railroad deregulation on grain transportation," Technical Bulletins 312302, United States Department of Agriculture, Economic Research Service.
    2. Wilson, Wesley W, 1997. "Cost Savings and Productivity in the Railroad Industry," Journal of Regulatory Economics, Springer, vol. 11(1), pages 21-40, January.
    3. Wang Chiang, S Judy & Friedlaender, Ann F, 1984. "Output Aggregation, Network Effects, and the Measurement of Trucking Technology," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 267-276, May.
    4. Bitzan, John D & Keeler, Theodore E, 2007. "Economies of Density and Regulatory Change in the U.S. Railroad Freight Industry," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 157-179, February.
    5. Braeutigam, Ronald R & Daughety, Andrew F & Turnquist, Mark A, 1984. "A Firm Specific Analysis of Economies of Density in the U.S. Railroad Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 33(1), pages 3-20, September.
    6. Keeler, Theodore E, 1974. "Railroad Costs, Returns to Scale, and Excess Capacity," The Review of Economics and Statistics, MIT Press, vol. 56(2), pages 201-208, May.
    7. John D. Bitzan, 2003. "Railroad Costs and Competition: The Implications of Introducing Competition to Railroad Networks," Journal of Transport Economics and Policy, University of Bath, vol. 37(2), pages 201-225, May.
    8. MacDonald, James M, 1989. "Railroad Deregulation, Innovation, and Competition: Effects of the Staggers Act on Grain Transportation," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 63-95, April.
    9. Richard H. Spady & Ann F. Friedlaender, 1978. "Hedonic Cost Functions for the Regulated Trucking Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 159-179, Spring.
    10. John D. Bitzan & Theodore E. Keeler, 2003. "Productivity Growth and Some of Its Determinants in the Deregulated U.S. Railroad Industry," Southern Economic Journal, John Wiley & Sons, vol. 70(2), pages 232-253, October.
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    Cited by:

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    2. Fumitoshi Mizutani & Shuji Uranishi, 2013. "Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries," Journal of Regulatory Economics, Springer, vol. 43(1), pages 31-59, January.

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