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A matching model for the backhaul problem

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  • Demirel, Erhan
  • Ommeren, Jos van
  • Rietveld, Piet

Abstract

The 'backhaul problem' is characterized by an imbalance in transport flows between locations. In a perfectly competitive framework with perfect information, the price of transport from low demand locations to high demand locations, the so-called backhaul price, drops to zero when the imbalance is sufficiently large. However, this result is inconsistent with empirical observations for many competitive transport markets (e.g. taxi and inland navigation markets). In this paper, we develop a matching model to show that a deviation from perfect information may address this inconsistency. We argue that carriers' search time to locate customers plays an important role in the determination of prices. We demonstrate that carriers are compensated for a part of the transport cost and for the time they search for customers. This implies positive backhaul prices. The matching model is numerically applied to the inland navigation shipping market in the Rhine river area in Western-Europe. We find that backhaul prices are substantial.

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Bibliographic Info

Article provided by Elsevier in its journal Transportation Research Part B: Methodological.

Volume (Year): 44 (2010)
Issue (Month): 4 (May)
Pages: 549-561

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Handle: RePEc:eee:transb:v:44:y:2010:i:4:p:549-561

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Keywords: Backhaul problem Imperfect information Matching models Search costs;

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References

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  1. Pissarides, Christopher A, 1994. "Search Unemployment with On-the-Job Search," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 457-75, July.
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  11. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-65, April.
  12. Sjostrom William, 2004. "Ocean Shipping Cartels: A Survey," Review of Network Economics, De Gruyter, vol. 3(2), pages 1-28, June.
  13. Olaf Jonkeren & Piet Rietveld & Jos van Ommeren, 2007. "Climate Change and Inland Waterway Transport: Welfare Effects of Low Water Levels on the river Rhine," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 41(3), pages 387-411, September.
  14. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
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