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Understanding ICC Rate Structure Regulation: A Spatial Analysis

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  • Kenneth Boyer

Abstract

A spatial equilibrium of a stylized railroad network is offered to illustrate that monopoly pricing requires prices on some links that are so high that traffic “does not move.” ICC price structure regulation, which was based on the idea that traffic should be priced to “move” in a privately owned and operated network, is modeled as maximizing market access subject to an AVC minimum and an aggregate break-even constraint in a network that is over-extended. Flows that result from such regulation are highly inefficient but provide more surplus to shippers and receivers than the unregulated price structure. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Kenneth Boyer, 2013. "Understanding ICC Rate Structure Regulation: A Spatial Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 121-144, August.
    • Handle: RePEc:kap:revind:v:43:y:2013:i:1:p:121-144
    DOI: 10.1007/s11151-013-9393-9
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    References listed on IDEAS

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    1. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    2. Robert H. Porter, 1983. "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 301-314, Autumn.
    3. Boyer, Kenneth D, 1981. "Equalizing Discrimination and Cartel Pricing in Transport Rate Regulation," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 270-286, April.
    4. Chris Nash, 2005. "Rail Infrastructure Charges in Europe," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 259-278, September.
    5. Harley, C. Knick, 1982. "Oligopoly Agreement and the Timing of American Railroad Construction," The Journal of Economic History, Cambridge University Press, vol. 42(4), pages 797-823, December.
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    Cited by:

    1. James MacDonald, 2013. "Railroads and Price Discrimination: The Roles of Competition, Information, and Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 85-101, August.
    2. Kenneth D. Boyer, 2016. "Three Principles for Optimal Pricing of Trackage Rights," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 347-369, September.
    3. Richard L. Schmalensee & Wesley W. Wilson, 2016. "Modernizing U.S. Freight Rail Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 133-159, September.

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