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The evolution of U.S. rail freight pricing in the post-deregulation era: revenues versus marginal costs for five commodity types


  • John Bitzan


  • Theodore Keeler


There have now been over three decades of experience with rate-making freedom for all modes of intercity freight transport in the United States. Most evidence suggests that regulatory change has been beneficial for the rail industry and its users. Despite evidence of positive impacts of regulatory reform of U.S. freight transport, there is limited evidence related to long-term pricing trends by commodity in the deregulated era. Moreover, U.S. shipper groups have called for increased regulation of U.S. railroads, citing increased rates and profits, and monopoly pricing to “captive shippers.” This study estimates U.S. railroad revenue-marginal cost ratios for seven different commodities between 1986 and 2008. Interestingly, we find no significant increase in revenue-cost margins for commodities thought to be “most captive” (coal and chemicals), while finding large increases for some commodities thought to be “non-captive.” These results may provide insight into the impacts of regulatory reform in other countries, where there are similar concerns of equitable pricing and financial viability. They suggest that a move toward a more market-based pricing system can enhance railroad viability without harming those with fewer transport options. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • John Bitzan & Theodore Keeler, 2014. "The evolution of U.S. rail freight pricing in the post-deregulation era: revenues versus marginal costs for five commodity types," Transportation, Springer, vol. 41(2), pages 305-324, March.
  • Handle: RePEc:kap:transp:v:41:y:2014:i:2:p:305-324
    DOI: 10.1007/s11116-013-9463-8

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    References listed on IDEAS

    1. Wilson, Wesley W, 1997. "Cost Savings and Productivity in the Railroad Industry," Journal of Regulatory Economics, Springer, vol. 11(1), pages 21-40, January.
    2. Faulhaber, Gerald R, 1975. "Cross-Subsidization: Pricing in Public Enterprises," American Economic Review, American Economic Association, vol. 65(5), pages 966-977, December.
    3. Bitzan, John D & Keeler, Theodore E, 2007. "Economies of Density and Regulatory Change in the U.S. Railroad Freight Industry," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 157-179, February.
    4. Ann F. Friedlaender, 1992. "Coal Rates and Revenue Adequacy in a Quasi-Regulated Rail Industry," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 376-394, Autumn.
    5. Gaskins Darius W., 2008. "Regulation of Freight Railroads in the Modern Era: 1970 - 2010," Review of Network Economics, De Gruyter, vol. 7(4), pages 1-12, December.
    6. John D. Bitzan & Theodore E. Keeler, 2003. "Productivity Growth and Some of Its Determinants in the Deregulated U.S. Railroad Industry," Southern Economic Journal, Southern Economic Association, vol. 70(2), pages 232-253, October.
    7. Pels, Eric & Rietveld, Piet, 2003. "Rail cost functions and scale elasticities: a meta-analysis," Serie Research Memoranda 0003, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    8. Ivaldi, Marc & McCullough, Gerard, 2007. "Railroad Pricing and Revenue-to-Cost Margins in the Post-Staggers Era," Research in Transportation Economics, Elsevier, vol. 20(1), pages 153-178, January.
    9. Keeler, Theodore E, 1971. "The Economics of Passenger Trains," The Journal of Business, University of Chicago Press, vol. 44(2), pages 148-174, April.
    10. John Bitzan & Theodore Keeler, 2011. "Intermodal traffic, regulatory change and carbon energy conservation in US freight transport," Applied Economics, Taylor & Francis Journals, vol. 43(27), pages 3945-3963.
    11. Ellig, Jerry, 2002. "Railroad Deregulation and Consumer Welfare," Journal of Regulatory Economics, Springer, vol. 21(2), pages 143-167, March.
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    Railroads; Freight; Regulation; Rates; Pricing;


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