Abstract
Most literature on freight demand has been macro economic in nature or related to inventory behavior of the firm. The paper below describes a theory of transport demand from the viewpoint of the classical theory of the firm. A demand function for transport is developed not only with respect to transport rate, but also with respect to transport time, loss and damage rates, packing costs, etc. Thus some transport quality variables are shown to enter the theory easily and yield intuitively plausible results. The model also yields a decision rule for transport mode selection in industries facing fixed market prices, namely: Choose the mode with the highest market price net of all of the transport variables. Unfortunately the rule cannot be generalized to monopoly situations. The model also makes the production and transport processes inter-dependent for the first time.
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