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Competition and Rail Rates for the Shipment of Corn, Soybeans, and Wheat

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  • James M. MacDonald

Abstract

This article investigates the extent and importance of rate competition among railroads for the export shipment of three narrowly defined agricultural commodities since passage of the Staggers Rail Act of 1980, which increased the railroads' freedom to set rates. I construct measures of intermodal and intramodal competition, and find that each has strong impacts on rail rates. The farther a shipper is from competing water transportation, the more considerably rates rise. Rates fall as railroad competition in a region increases. There appears to be some interaction between intermodal and intramodal competition. I find that the competitive effects of two proposed rail mergers depend on the vigor of intermodal competition from truck and water transport and on the change in interrailroad competition that results from the reduced number of competing rail systems.

Suggested Citation

  • James M. MacDonald, 1987. "Competition and Rail Rates for the Shipment of Corn, Soybeans, and Wheat," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 151-163, Spring.
  • Handle: RePEc:rje:randje:v:18:y:1987:i:spring:p:151-163
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    Cited by:

    1. José A. Gómez-Ibáñez, 2016. "Open Access to Infrastructure Networks: The Experience of Railroads," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 311-345, September.
    2. Lawrence White, 2002. "Staples-Office Depot and UP-SP: An Antitrust Tale of Two Proposed Mergers," Working Papers 02-12, New York University, Leonard N. Stern School of Business, Department of Economics.
    3. Craig Depken, 1999. "Free-Agency and the Competitiveness of Major League Baseball," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(3), pages 205-217, May.
    4. Prater, Marvin E. & Casavant, Ken & Jessup, Eric & Blanton, Bruce & Bahizi, Pierre & Nibarger, Daniel & Weingram, Isaac, 2010. "Rail Competition Changes Since the Staggers Act," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 49(3), pages 1-23.
    5. Babcock, Michael W. & Atems, Bebonchu, 2015. "Intrarailroad and Intermodal Competition Impacts on Railroad Wheat Rates," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 54(3), pages 1-24.
    6. Schmidt, Stephen, 2001. "Market structure and market outcomes in deregulated rail freight markets," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 99-131, January.
    7. Wesley W. Wilson & Frank A. Wolak, 2018. "Benchmark Regulation of Multiproduct Firms: An Application to the Rail Industry," NBER Working Papers 25268, National Bureau of Economic Research, Inc.
    8. Kleit, Andrew N. & Palsson, Halldor P., 1999. "Horizontal concentration and anticompetitive behavior in the central Canadian cement industry: testing arbitrage cost hypotheses," International Journal of Industrial Organization, Elsevier, vol. 17(8), pages 1189-1202, November.
    9. Pittman, Russell, 2007. "Options for Restructuring the State-Owned Monopoly Railway," Research in Transportation Economics, Elsevier, vol. 20(1), pages 179-198, January.
    10. 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.
    11. Gonzales, Daniela & Searcy, Erin M. & Ekşioğlu, Sandra D., 2013. "Cost analysis for high-volume and long-haul transportation of densified biomass feedstock," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 48-61.
    12. 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.
    13. Cui, Shana & Pittman, Russell & Zhao, Jian, 2018. "Restructuring the Chinese Freight Railway: Two Scenarios," MPRA Paper 88407, University Library of Munich, Germany.
    14. Russell Pittman, 2017. "The Strange Career Of Independent Voting Trusts In U.S. Rail Mergers," Journal of Competition Law and Economics, Oxford University Press, vol. 13(1), pages 89-102.
    15. Krier, Betty & Liu, Chia-Mei & McNamara, Brian & Sharpe, Jerrod, 2014. "Individual freight effects, capacity utilization, and Amtrak service quality," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 163-175.
    16. 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.
    17. Lee Pinkowitz & Rohan Williamson, 2016. "The Staggers Act and Firm Performance: Long-Run Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 161-202, September.
    18. Babcock, Michael W. & McKamey, Matthew & Gayle, Phillip, 2014. "State Variation in Railroad Wheat Rates," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 53(3), pages 1-19.
    19. MacDonald, James M., 2002. "Agribusiness Concentration, Competition And Nafta," Proceedings of the 7th Agricultural and Food Policy Systems Information Workshop, 2001: Structural Change as a Source of Trade Disputes Under NAFTA 16883, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.

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