Regulating the United States Railroads: The Effects of Sunk Costs and Asymmetric Risk
The Surface Transportation Board (STB) applies the theory of contestable markets to regulate dominant railroad freight movements. The STB bases its determination whether railroad revenues are excessive if they would be more than sufficient to support investment in a hypothetical stand-alone railroad designed to handle the at-issue traffic efficiently. The STB regulatory approach does not take correct account of the importance of sunk costs and irreversible investments in the railroad industry. We estimate how large the mistakes can be by applying a real options approach that takes into account the effect of sunk costs, irreversible investment, and asymmetric returns. Copyright 2002 by Kluwer Academic Publishers
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:kap:regeco:v:22:y:2002:i:3:p:287-310. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.