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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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
Date of revision:
Contact details of provider:
Postal: 109 McLaughlin Hall, Mail Code 1720, Berkeley, CA 94720-1720
Web page: http://www.escholarship.org/repec/uctc/
More information through EDIRC
Social and Behavioral Sciences;
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- De Vany, Arthur & Frey, Gail, 1982. "Backlogs and the Value of Excess Capacity in the Steel Industry," American Economic Review, American Economic Association, vol. 72(3), pages 441-51, June.
- De Vany, Arthur S & Saving, Thomas R, 1977. "Product Quality, Uncertainty, and Regulation: The Trucking Industry," American Economic Review, American Economic Association, vol. 67(4), pages 583-94, September.
- Saif Benjaafar & Ehsan Elahi & Karen L. Donohue, 2007. "Outsourcing via Service Competition," Management Science, INFORMS, vol. 53(2), pages 241-259, February.
- Thomas N. Hubbard, 1999. "How Wide is the Scope of Hold-Up-Based Theories? Contractual Form and Market Thickness in Trucking," NBER Working Papers 7347, National Bureau of Economic Research, Inc.
- Gérard P. Cachon & Fuqiang Zhang, 2006. "Procuring Fast Delivery: Sole Sourcing with Information Asymmetry," Management Science, INFORMS, vol. 52(6), pages 881-896, June.
- Koenigsberg, Ernest, 1980. "Uncertainty, Capacity, and Market Share in Oligopoly: A Stochastic Theory of Product Quality," The Journal of Business, University of Chicago Press, vol. 53(2), pages 151-64, April.
- De Vany, Arthur S, 1976. "Uncertainty, Waiting Time, and Capacity Utilization: A Stochastic Theory of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 523-41, June.
- Jan K. Brueckner, 2010. "Schedule Competition Revisited," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 44(3), pages 261-285, September.
- Jan K. Brueckner, 2004.
"Network Structure and Airline Scheduling,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(2), pages 291-312, 06.
- Minner, Stefan, 2003. "Multiple-supplier inventory models in supply chain management: A review," International Journal of Production Economics, Elsevier, vol. 81(1), pages 265-279, January.
- Noah Gans, 2002. "Customer Loyalty and Supplier Quality Competition," Management Science, INFORMS, vol. 48(2), pages 207-221, February.
- De Vany, Arthur S & Saving, Thomas R, 1983. "The Economics of Quality," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 979-1000, December.
- Martin, Robert E, 1981. "Stochastic Input Deliveries," Economic Inquiry, Western Economic Association International, vol. 19(4), pages 640-49, October.
- Albert Y. Ha & Lode Li & Shu-Ming Ng, 2003. "Price and Delivery Logistics Competition in a Supply Chain," Management Science, INFORMS, vol. 49(9), pages 1139-1153, September.
- Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May.
- Hubbard, Thomas N, 2001. "Contractual Form and Market Thickness in Trucking," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 369-86, Summer.
- Jan K. Brueckner & Dan Luo, 2013. "Measuring Strategic Firm Interaction in Product-Quality Choices: The Case of Airline Flight Frequency," CESifo Working Paper Series 4066, CESifo Group Munich.
- Lakew, Paulos Ashebir, 2014. "Economies of traffic density and scale in the integrated air cargo industry: The cost structures of FedEx Express and UPS Airlines," Journal of Air Transport Management, Elsevier, vol. 35(C), pages 29-38.
- Abate, Megersa & de Jong, Gerard, 2014. "The optimal shipment size and truck size choice – The allocation of trucks across hauls," Transportation Research Part A: Policy and Practice, Elsevier, vol. 59(C), pages 262-277.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.