Price and frequency competition in freight transportation
This paper develops a simple analytical model of price and frequency competition among freight carriers. In the model, the full price faced by a shipper (a goods producer) includes the actual shipping price plus an inventory holding cost, which is inversely proportional to the frequency of shipments offered by the freight carrier. Taking brand loyalty on the part of shippers into account, competing freight carriers maximize profit by setting prices, frequencies and vehicle carrying capacities. Assuming tractable functional forms, long- and short-run comparative-static results are derived to show how the choice variables are affected by the model’s parameters. The paper also provides an efficiency analysis, comparing the equilibrium to the social optimum, and it attempts to explain the phenomenon of excess capacity in the freight industry.
Volume (Year): 46 (2012)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
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.:
- 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.
- 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.
- 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.
- 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.
- 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, 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.
- 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.
- 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.
- Gérard P. Cachon & Fuqiang Zhang, 2006. "Procuring Fast Delivery: Sole Sourcing with Information Asymmetry," Management Science, INFORMS, vol. 52(6), pages 881-896, June.
- Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May.
- Jan K. Brueckner, 2004.
"Network Structure and Airline Scheduling,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(2), pages 291-312, 06.
- Noah Gans, 2002. "Customer Loyalty and Supplier Quality Competition," Management Science, INFORMS, vol. 48(2), pages 207-221, February.
- 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, 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.
- Saif Benjaafar & Ehsan Elahi & Karen L. Donohue, 2007. "Outsourcing via Service Competition," Management Science, INFORMS, vol. 53(2), pages 241-259, February.
When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:46:y:2012:i:6:p:938-953. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.