Price and Frequency Competition in Freight Transportation
AbstractThis paper develops a simple analytical model of price and frequency competitionamong freight carriers. In the model, the full price faced by a shipper (a goodsproducer) includes the actual shipping price plus an inventory holding cost, whichis inversely proportional to the frequency of shipments offered by the freight carrier. Taking brand loyalty on the part of shippers into account, competing freightcarriers maximize profit by setting prices, frequencies and vehicle carrying capacities. Assuming tractable functional forms, long- and short-run comparative-staticresults are derived to show how the choice variables are affected by the modelâ€™sparameters. The paper also provides an efficiency analysis, comparing the equilibrium to the social optimum, and it attempts to explain the phenomenon of excesscapacity in the freight industry.
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Bibliographic InfoPaper provided by University of California Transportation Center in its series University of California Transportation Center, Working Papers with number qt1n42k26q.
Date of creation: 01 Sep 2011
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Other versions of this item:
- Shah, Nilopa & Brueckner, Jan K., 2012. "Price and frequency competition in freight transportation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(6), pages 938-953.
- NEP-ALL-2012-03-28 (All new papers)
- NEP-COM-2012-03-28 (Industrial Competition)
- NEP-IND-2012-03-28 (Industrial Organization)
- NEP-TRE-2012-03-28 (Transport Economics)
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