IDEAS home Printed from https://ideas.repec.org/p/ags/ndtimr/231799.html
   My bibliography  Save this paper

Railroad Cost Considerations and the Benefits/Costs of Mergers

Author

Listed:
  • Bitzan, John D.

Abstract

This study examines the cost conditions present in the Class I railroad industry. Recent mergers and merger proposals have brought forth questions regarding the desirability of maintaining competition in areas impacted by horizontal mergers and, similarly, the desirability of end-to-end mergers. As we consider the costs and benefits of various merger oversight policies, it is imperative that we understand the welfare effects of such policies. One essential element of such welfare effects is the effects on costs within the industry. In examining the cost conditions in the industry, the study finds that railroads are natural monopolies over current networks. That is, duplicate networks serving the same railroad markets would result in increased industry costs. This suggests that maintaining competition in markets impacted by horizontal mergers is not justified by railroad cost considerations. In examining the potential cost effects of end-to-end mergers, the study finds evidence to suggest that Class l railroads are natural monopolies as networks are expanded.

Suggested Citation

  • Bitzan, John D., 1997. "Railroad Cost Considerations and the Benefits/Costs of Mergers," MPC Reports 231799, North Dakota State University, Upper Great Plains Transportation Institute.
  • Handle: RePEc:ags:ndtimr:231799
    DOI: 10.22004/ag.econ.231799
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/231799/files/agecon-ndsu-378-784-u664-m-97-80.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.231799?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Evans, David S & Heckman, James J, 1986. "A Test for Subadditivity of the Cost Function with an Application to the Bell System: Erratum," American Economic Review, American Economic Association, vol. 76(4), pages 856-858, September.
    2. repec:bla:scandj:v:87:y:1985:i:2:p:160-93 is not listed on IDEAS
    3. Caves, Douglas W & Christensen, Laurits R & Swanson, Joseph A, 1981. "Productivity Growth, Scale Economies, and Capacity Utilization in U.S. Railroads, 1955-74," American Economic Review, American Economic Association, vol. 71(5), pages 994-1002, December.
    4. Evans, David S & Heckman, James J, 1984. "A Test for Subadditivity of the Cost Function with an Application to the Bell System," American Economic Review, American Economic Association, vol. 74(4), pages 615-623, September.
    5. Braeutigam, Ronald R & Daughety, Andrew F & Turnquist, Mark A, 1984. "A Firm Specific Analysis of Economies of Density in the U.S. Railroad Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 33(1), pages 3-20, September.
    6. Lee, Tenpao & Baumel, C. Phillip, 1987. "The Cost of Structure of the U.S. Railroad Industry Under Deregulation," Staff General Research Papers Archive 11685, Iowa State University, Department of Economics.
    7. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1263-1289, September.
    8. Keeler, Theodore E, 1974. "Railroad Costs, Returns to Scale, and Excess Capacity," The Review of Economics and Statistics, MIT Press, vol. 56(2), pages 201-208, May.
    9. Barbera, Anthony & Grimm, Curtis M. & Phillips, Kent A. & Selzer, Leslie J., 1987. "Railroad Cost Structure - Revisited," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 28(01).
    10. Caves, Douglas W & Christensen, Laurits R & Tretheway, Michael W, 1980. "Flexible Cost Functions for Multiproduct Firms," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 477-481, August.
    11. Douglas W. Caves & Laurits R. Christensen & Joseph A. Swanson, 1980. "Productivity in U.S. Railroads, 1951-1974," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 166-181, Spring.
    12. Richard C. Levin, 1981. "Railroad Rates, Profitability, and Welfare Under Deregulation," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 1-26, Spring.
    13. Richard T. Shin & John S. Ying, 1992. "Unnatural Monopolies in Local Telephone," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 171-183, Summer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bitzan, John, 2000. "Railroad Cost Conditions: Implications for Policy," UGPTI Department Publication 231804, North Dakota State University, Upper Great Plains Transportation Institute.
    2. Waters II, William G., 2007. "Evolution of Railroad Economics," Research in Transportation Economics, Elsevier, vol. 20(1), pages 11-67, January.
    3. 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.
    4. Ripplinger, David G. & Bitzan, John D., 2018. "The cost structure of transit in small urban and rural U.S. communities," Transportation Research Part A: Policy and Practice, Elsevier, vol. 117(C), pages 176-189.
    5. Rinki Sarkar, 1998. "Economic Characteristics Of The Urban Bus Transit Industry- A Comparative Analysis Of Three Regulated Metropolitan Bus Corporations In India," Working papers 54, Centre for Development Economics, Delhi School of Economics.
    6. Yu Hsing, 1995. "Impacts of deregulation and price caps on rate convergence between Washington, DC and eight major cities: A pooled data model," Information Economics and Policy, Elsevier, vol. 7(2), pages 135-145, June.
    7. Nick Wills‐Johnson, 2008. "Separability and Subadditivity in Australian Railways," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 95-108, March.
    8. Gary Madden & Harry Bloch & Grant Coble-Neal, 2002. "Labour and capital saving technical change in telecommunications," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1821-1828.
    9. Christodoulopoulos, Th., 1995. "Telecommunications in Greece: A study of production structure and natural monopoly issue," International Journal of Production Economics, Elsevier, vol. 38(2-3), pages 147-157, March.
    10. Kjell Salvanes & Sigve Tjøtta, 1998. "A Note on the Importance of Testing for Regularities for Estimated Flexible Functional Forms," Journal of Productivity Analysis, Springer, vol. 9(2), pages 133-143, March.
    11. Krouse, Clement G & Cabolis, Christos & Danger, Kenneth L & Carter, Tanja D & Riddle, Jon M & Ryan, Daniel J, 1999. "The Bell System Divestiture/Deregulation and the Efficiency of the Operating Companies," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 61-87, April.
    12. Lucinda, Claudio Ribeiro & Anuatti, Francisco, 2017. "Economies of Scale and Scope in the Sanitation Sector," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 37(2), November.
    13. Harry Bloch & Gary Madden & Scott Savage, 2001. "Economies of Scale and Scope in Australian Telecommunications," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(2), pages 219-227, March.
    14. Lorincz, Szabolcs, 2006. "Cost structure and complementarity in U.S. Telecommunications, 1989-1999," Information Economics and Policy, Elsevier, vol. 18(3), pages 285-302, September.
    15. repec:ags:aaea22:335439 is not listed on IDEAS
    16. Banker, Rajiv D. & Chang, Hsi-Hui & Majumdar, Sumit K., 1998. "Economies of scope in the U.S. telecommunications industry1," Information Economics and Policy, Elsevier, vol. 10(2), pages 253-272, June.
    17. Gordon, D. V. & Gunsch, K. & Pawluk, C. V., 2003. "A natural monopoly in natural gas transmission," Energy Economics, Elsevier, vol. 25(5), pages 473-485, September.
    18. Maher, Maria E., 1999. "Access costs and entry in the local telecommunications network: a case for de-averaged rates," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 593-609, May.
    19. Valentina Hartarska & Jingfang Zhang & Denis A. Nadolnyak, 2023. "Scope economies from rural and urban microfinance services," Southern Economic Journal, John Wiley & Sons, vol. 89(4), pages 1138-1167, April.
    20. Laura Onofri & Francesc Maynou, 2017. "An Empirical Test for Costs Subadditivity in the Fishery Sector," EERI Research Paper Series EERI RP 2017/10, Economics and Econometrics Research Institute (EERI), Brussels.
    21. Harry Bloch & Gary Madden & Grant Coble‐Neal & Scott J. Savage, 2001. "The Cost Structure of Australian Telecommunications," The Economic Record, The Economic Society of Australia, vol. 77(239), pages 338-350, December.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:ndtimr:231799. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: http://www.ugpti.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.