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Industry costs and consolidation: efficiency gains and mergers in the U.S. railroad industry

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  • John Bitzan

    ()

  • Wesley Wilson

    ()

Abstract

Since partial deregulation in 1980, there has been a massive consolidation of firms in the U.S. railroad industry premised largely on efficiency gains. We estimate a cost function and use it to calculate cost effects for specific mergers and for all mergers at the industry level from 1983–2003. Our central results are that consolidation in the railroad industry accounts for about an 11.4 percent reduction in industry costs (more than $4 Billion in 1992 prices), and that while there are tremendous differences across mergers with respect to the direction, level, timing, and source of cost impacts, most mergers result in cost savings. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11151-007-9128-x
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Bibliographic Info

Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 30 (2007)
Issue (Month): 2 (March)
Pages: 81-105

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Handle: RePEc:kap:revind:v:30:y:2007:i:2:p:81-105

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Web page: http://www.springerlink.com/link.asp?id=100336

Related research

Keywords: Deregulation; Railroads; Mergers;

References

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  1. Ivaldi, Marc & Mccullough, Gerard, 1999. "Density and Integration Effects on Class I U.S. Freight Railroads," IDEI Working Papers 93, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  3. Wilson, Wesley W, 1997. "Cost Savings and Productivity in the Railroad Industry," Journal of Regulatory Economics, Springer, vol. 11(1), pages 21-40, January.
  4. Pittman, Russell W, 1990. "Railroads and Competition: The Santa Fe/Southern Pacific Merger Proposal," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 25-46, September.
  5. Winston, Clifford, 1985. "Conceptual Development in the Economics of Transportation: An Interpretive Survey," Journal of Economic Literature, American Economic Association, vol. 23(1), pages 57-94, March.
  6. Harris, Robert G & Winston, Clifford M, 1983. "Potential Benefits of Rail Mergers: An Econometric Analysis of Network Effects on Service Quality," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 32-40, February.
  7. 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 270-86, April.
  8. Wilson, Wesley W, 1994. "Market-Specific Effects of Rail Deregulation," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 1-22, March.
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Cited by:
  1. Coublucq, Daniel, 2013. "Econometric analysis of productivity with measurement error: Empirical application to the US Railroad industry," DICE Discussion Papers 95, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  2. Daigyo Seo & Allen Featherstone & Dennis Weisman & Yuan Gao, 2010. "Market Consolidation and Productivity Growth in U.S. Wireline Telecommunications: Stochastic Frontier Analysis vs. Malmquist Index," Review of Industrial Organization, Springer, vol. 36(3), pages 271-294, May.
  3. Orley C. Ashenfelter & Daniel Hosken & Matthew C. Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," NBER Working Papers 19939, National Bureau of Economic Research, Inc.

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