Conclusion
The present analysis of transport demand for manufactured iron and steel products, one of the high-valued commodities, results in price elasticities of demand which are midly elastic with regard to motor carriers and slightly inelastic with regard to railroads. These estimates are sufficiently at variance with the elasticity findings for all manufactured goods together to suggest that there probably exists a rather broad spectrum of transport demand elasticities for most manufactured goods.22 Together with the elasticity estimates obtained, motor carriers have been capturing larger shares of the transport service market over time, more so than would be expected from the price elasticities alone. This is to suggest that nonprice determinants may be crucial in transport desision making, even in the short run.
Railroads derive disproportionately large revenue contributions from manufactured goods. Were they to engage in a pricing policy which approximated marginal costs it appears that the rapid growth in the motor carrier share of the manufactured goods market might be halted. Such a pricing policy would not only shift intermodal competition as to commodities handled, but more importantly, it would reintroduce intermodal competition by lengths of haul. Perhaps comparative advantage, and thereby optimal allocation, would be enhanced.
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References
J. R. Meyer,et al., The Economics of Competition in the Transportation Industries (Cambridge: Harvard University Press, 1960), p. 173.
Ibid.,, p. 185.
Interstate Commerce Commission, Bureau of Transport Economics and Statistics,Intercity Ton-Miles 1939–1959 (Washington, D.C.) Statement Number 6103, April, 1961.
Derived from materials in Interstate Commerce Commission,Freight Commodity Statistics in the United States, Class I Railroads, annual; also see, D. P. Locklin,Economics of Transportation (Homewood: R. D. Irwin, Inc., 1960), p. 637.
op. cit., p. 195.
Ibid.,, p. 173, chaps. 3 and 4.
A similar theoretical model formulation is discussed in H. Benishay and G. R. Whitaker, Jr., “An Empirical Study of Transportation Supply and Demand Relationships,” paper presented at the Fourth Annual Meeting of the Transportation Research Forum, Boston, December, 1963.
M. J. Roberts, “Maximum Freight Rate Regulation and Railroad Earnings Control,”Land Economics, XXXV (1959), p. 128. Emphasis added.
E. D. Perle,The Demand For Transportation (Chicago: University of Chicago, Department of Geography, Research Paper, No. 95, 1964).
For a complete discussion of available data, regionalizations, and methods used for aggregation, see:op. cit., pp. 24–30. Note, however, that these are Interstate Commerce Commission statistical regions and bear little resemblance to any other set of regions for governmental statistical purposes.
For a good presentation of consumer demand theory, see W. J. Baumol,Economic Theory and Operations Analysis (Englewood Cliffs: Prentice-Hall, 1961). For a mathematical approach, see J. M. Henderson and R. E. Quandt,Microeconomic Theory (New York, McGraw-Hill, 1958).
For a derivation and a theoretical exposition of this elasticity concept, see A. C. Harberger, “Some Evidence on the International Price Mechanics,”Journal of Political Economy, LXV (December, 1957), pp. 506–21. For an applied presentation, see I. Horowitz, “An Econometric Analysis of Supply and Demand in the Synthetic Rubber Industry,”International Economic Review, IV (September, 1963), pp. 325–45.
A presentation and discussion of shift variables and their use is D. B. Suits, “Use of Dummy Variables in Regression Equations,”Journal of the American Statistical Association, LIV (December, 1957), pp. 548–51.
Price is here defined as revenue per ton. Furthermore, all prices in the estimating functions were deflated from nominal to real terms through the use of implicit price deflators, for G. N. P. See United States Department of Commerce, Office, of Business Economics,Survey of Current Business (Washington: Government Printing Office, July, 1961), Table 6, p. 7.
This constraint is required for inverting the variance-covariance matrix. For a detailed discussion, seeSuits,op. cit..
For a discussion of “umbrella pricing” and its effects, see D. Alexander and L. Moses, “Competition under Uneven Regulation,”American Economic Review, LIII (May, 1963), pp. 466–74.
Elasticity findings for all manufactured goods were referred to earlier. See:op. cit.. chap. 6.
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Perle, E.D. Estimation of transportation demand. Papers of the Regional Science Association 15, 203–215 (1965). https://doi.org/10.1007/BF01947874
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DOI: https://doi.org/10.1007/BF01947874