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Network Pricing: Service Differentials, Scale Economies, and Vertical Exclusion in Railroad Markets

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  • Mark Burton
  • Wesley W. Wilson

Abstract

We develop and estimate a model of railroad pricing over a network where railroads may, or may not, face upstream, or downstream, competition with barges. Service quality differences amongst modes and link economies may result in railroad pricing which can exclude barge movements in the connected markets. A sample of agricultural railroad movements is used to compare rates on traffic between markets where there is, and is not, a potential for such pricing behaviour. The results strongly support the hypothesis that vertical exclusion pricing exists and varies across commodities with effects ranging from 6 to 24 per cent. © 2006 LSE and the University of Bath

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  • Mark Burton & Wesley W. Wilson, 2006. "Network Pricing: Service Differentials, Scale Economies, and Vertical Exclusion in Railroad Markets," Journal of Transport Economics and Policy, University of Bath, vol. 40(2), pages 255-277, May.
    • Handle: RePEc:tpe:jtecpo:v:40:y:2006:i:2:p:255-277
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    Cited by:

    1. Alexei Alexandrov & Russell Pittman & Olga Ukhaneva, 2018. "Pricing of Complements in the U.S. Freight Railroads: Cournot Versus Coase," EAG Discussions Papers 201801, Department of Justice, Antitrust Division.
    2. 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.
    3. T. Randolph Beard & Jeffrey Thomas Macher & Chris Vickers, 2016. "This Time is Different (?): Telecommunications Unbundling and Lessons for Railroad Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 289-310, September.

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