Abstract
Most truckload freight in the United States is priced using long‐term contracts. It is widely recognized in industry that contract prices evolve based on prices shippers pay for one‐time spot market transactions. This research examines whether the impact of spot market prices on contract prices has become more pronounced following the start of the electronic logging device (ELD) mandate. We draw on economic theories regarding how firms process information to explain why the ELD mandate, by reducing carriers’ ability to artificially adjust capacity up or down as spot prices changed, should strengthen this relationship. To test this prediction, we construct a database that combines monthly proprietary spot market pricing data from DAT Solutions with monthly public contract pricing data from the Bureau of Labor Statistics. We test our predictions using time series regression and evaluate the robustness of our findings using both instrumental variable estimation and seemingly unrelated regression to rule out reverse causality. Consistent with our theorizing, we further this relationship has become more pronounced since the ELD mandate started. We explain the importance of these findings to theory and practice.
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