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Measuring the Multilateral Allocation of Rents: Wyoming Low-Sulfur Coal

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  • Scott E. Atkinson
  • Joe Kerkvliet

Abstract

This article develops a general econometric procedure for determining the amount of rent captured by buyers and sellers of goods produced under any market structure. We use this technique to measure the rents earned by firms involved in the extraction, transportation, and consumption of low-sulfur Wyoming coal. Statistical results indicate that railroads and coal producers each capture about 23% of potential rent, while the state and purchasing utilities capture 7% and 47%, respectively. Further, statistical tests support the hypothesis that rents have shifted towards the railroads since their deregulation in 1980. We also examine the extent of discriminatory pricing by relating the percentage markups of price over estimated marginal cost to the demand elasticity for coal. We find evidence of price discrimination by coal producers and railroads, but the degree of price discrimination exercised by coal producers declines with more recent contracts.

Suggested Citation

  • Scott E. Atkinson & Joe Kerkvliet, 1986. "Measuring the Multilateral Allocation of Rents: Wyoming Low-Sulfur Coal," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 416-430, Autumn.
    • Handle: RePEc:rje:randje:v:17:y:1986:i:autumn:p:416-430
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    Citations

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    Cited by:

    1. Vachal, Kimberly & Bitzan, John, 1997. "Implications of a North American Grain Marketing System for Prairie Transportation and Elevators," MPC Reports 231802, North Dakota State University, Upper Great Plains Transportation Institute.
    2. Jonathan E. Hughes & Ian Lange, 2020. "Who (Else) Benefits From Electricity Deregulation? Coal Prices, Natural Gas, And Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1053-1075, July.
    3. Bitzan, John & Vachal, Kimberly & VanWechel, Tamara & Vinje, Dan, 2003. "The Differential Effects of Rail Rate Deregulation U.S. Corn, Wheat and Soybean Markets," MPC Reports 231695, North Dakota State University, Upper Great Plains Transportation Institute.
    4. John Bitzan & Wesley Wilson, 2007. "Industry costs and consolidation: efficiency gains and mergers in the U.S. railroad industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(2), pages 81-105, March.
    5. Bitzan, John & Tolliver, Denver & Linderman, Wayne, 1996. "The Impacts of the Clean Air Act Amendments of 1990 and Changes in Rail Rates on Western Coal," MPC Reports 231723, North Dakota State University, Upper Great Plains Transportation Institute.
    6. Wilson, Wesley W. & Wilson, William W., 2001. "Deregulation, rate incentives, and efficiency in the railroad market," Research in Transportation Economics, Elsevier, vol. 6(1), pages 1-24, January.
    7. James MacDonald, 2013. "Railroads and Price Discrimination: The Roles of Competition, Information, and Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 85-101, August.
    8. Wilson, Wesley W. & Wilson, William W., 1998. "Deregulation And Innovation In Railroad Shipping Of Agricultural Commodities: 1972-1995," AE Series 23090, North Dakota State University, Department of Agribusiness and Applied Economics.
    9. Joe Kerkvliet & Jason F. Shogren, 2001. "The Determinants of Coal Contract Duration for the Powder River Basin," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 608-622, December.
    10. Tschirhart, John, 1995. "Monopsony power and the existence of natural monopoly in energy utilities," Resource and Energy Economics, Elsevier, vol. 17(4), pages 327-340, December.
    11. Matthew Oliver & Charles Mason & David Finnoff, 2014. "Pipeline congestion and basis differentials," Journal of Regulatory Economics, Springer, vol. 46(3), pages 261-291, December.
    12. 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.
    13. Oliver, Matthew E., 2019. "Pricing flexibility under rate-of-return regulation: Effects on network infrastructure investment," Economic Modelling, Elsevier, vol. 78(C), pages 150-161.
    14. Hughes, Jonathan E., 2011. "The higher price of cleaner fuels: Market power in the rail transport of fuel ethanol," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 123-139, September.

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