Price and frequency competition in freight transportation
AbstractThis paper develops a simple analytical model of price and frequency competition among freight carriers. In the model, the full price faced by a shipper (a goods producer) includes the actual shipping price plus an inventory holding cost, which is inversely proportional to the frequency of shipments offered by the freight carrier. Taking brand loyalty on the part of shippers into account, competing freight carriers maximize profit by setting prices, frequencies and vehicle carrying capacities. Assuming tractable functional forms, long- and short-run comparative-static results are derived to show how the choice variables are affected by the model’s parameters. The paper also provides an efficiency analysis, comparing the equilibrium to the social optimum, and it attempts to explain the phenomenon of excess capacity in the freight industry.
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Bibliographic InfoArticle provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.
Volume (Year): 46 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description
Other versions of this item:
- Shah, Nilopa & Brueckner, Jan K., 2011. "Price and Frequency Competition in Freight Transportation," University of California Transportation Center, Working Papers qt1n42k26q, University of California Transportation Center.
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