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A Matching Model for the Backhaul Problem

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  • Erhan Demirel

    ()
    (Vrije Universiteit Amsterdam)

  • Jos van Ommeren

    ()
    (Vrije Universiteit Amsterdam)

  • Piet Rietveld

    ()
    (Vrije Universiteit Amsterdam)

Abstract

The ‘backhaul problem’ is characterized by an imbalance in transport flows between locations. This problem is usually studied in a perfectly competitive framework, which essentially predicts that when the imbalance is sufficiently large, the freight price of transport from low demand regions to high demand regions, the so-called backhaul price, drops to zero. This result is inconsistent with empirical observations. In this paper, we develop a matching model to address this inconsistency. We argue that market friction, through search imperfections due to lack of information by carriers on the (future) demand for transport by customers, may play an important role in the determination of backhaul prices. We demonstrate that carriers are at least compensated for the time they search for customers, so the backhaul price is in general positive. The matching model is numerically applied to the inland navigation shipping market in the Rhine river area in Western-Europe. We also analyse the effects of increases in transport costs on transport flows and backhaul prices, e.g. due to climate changes.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-083/3.

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Date of creation: 30 Oct 2007
Date of revision: 19 Dec 2007
Handle: RePEc:dgr:uvatin:20070083

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Web page: http://www.tinbergen.nl

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Keywords: Backhaul Problem; Imperfect Information; Matching Models;

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  1. Jong-Wha Lee & Warwick J. McKibbin & Yung Chul Park, 2006. "Transpacific Trade Imbalances: Causes and Cures," Discussion Paper Series 0601, Institute of Economic Research, Korea University.
  2. Behrens, Kristian & Gaigné, Carl & Thisse, Jacques-François, 2009. "Industry location and welfare when transport costs are endogenous," Journal of Urban Economics, Elsevier, vol. 65(2), pages 195-208, March.
  3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  5. BEHRENS, Kristian & GAIGNE, Carl & OTTAVIANO, Gianmarco I.P. & THISSE, Jacques-François, . "How density economies in international transportation link the internal geography of trading partners," CORE Discussion Papers RP -1870, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. 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.
  7. Sjostrom William, 2004. "Ocean Shipping Cartels: A Survey," Review of Network Economics, De Gruyter, vol. 3(2), pages 1-28, June.
  8. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  9. Olaf Jonkeren & Erhan Demirel & Jos van Ommeren & Piet Rietveld, 2011. "Endogenous transport prices and trade imbalances," Journal of Economic Geography, Oxford University Press, vol. 11(3), pages 509-527, May.
  10. 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.
  11. Arnott, Richard, 1996. "Taxi Travel Should Be Subsidized," Journal of Urban Economics, Elsevier, vol. 40(3), pages 316-333, November.
  12. Ricardo A. Lagos, . "An Alternative Approach to Market Frictions: An Application to the Market for Taxicab Rides," Penn CARESS Working Papers 058589d20e3fbe4e559adb44b, Penn Economics Department.
  13. Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers dp0074, Centre for Economic Performance, LSE.
  14. 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.
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