Captive Shippers Research Articles

Costs, density economies, and differential pricing in the U.S. railroad industry

This study estimates returns to density in the U.S. Railroad industry using a cost function with commodity-specific outputs and explores implications for differential pricing. We find that large density economies persist in the U.S. railroad industry, suggesting that marginal cost pricing would not come close to recovering railroad costs. Increased pricing freedom from deregulation has enabled railroads to retain relatively competitive shippers and has fostered substantial cost reductions and innovation. While there is room to improve rate relief processes for relatively captive shippers, policies that make broad changes limiting the extent of differential pricing allowed by railroads have the potential to reduce the ability of the industry to respond to market forces, limiting investment and innovation, and harming railroads and shippers.

The evolution of U.S. rail freight pricing in the post-deregulation era: revenues versus marginal costs for five commodity types

There have now been over three decades of experience with rate-making freedom for all modes of intercity freight transport in the United States. Most evidence suggests that regulatory change has been beneficial for the rail industry and its users. Despite evidence of positive impacts of regulatory reform of U.S. freight transport, there is limited evidence related to long-term pricing trends by commodity in the deregulated era. Moreover, U.S. shipper groups have called for increased regulation of U.S. railroads, citing increased rates and profits, and monopoly pricing to “captive shippers.” This study estimates U.S. railroad revenue-marginal cost ratios for seven different commodities between 1986 and 2008. Interestingly, we find no significant increase in revenue-cost margins for commodities thought to be “most captive” (coal and chemicals), while finding large increases for some commodities thought to be “non-captive.” These results may provide insight into the impacts of regulatory reform in other countries, where there are similar concerns of equitable pricing and financial viability. They suggest that a move toward a more market-based pricing system can enhance railroad viability without harming those with fewer transport options.

Regulators Propose Rail Policy Reforms

RETURN TO ISSUEPREVNewsNEXTRegulators Propose Rail Policy ReformsCite this: Chem. Eng. News 2012, 90, 33, 31Publication Date (Print):August 13, 2012Publication History Published online29 March 2013Published inissue 13 August 2012https://doi.org/10.1021/cen-09033-govpol4Copyright © 2012 Chemical & Engineering NewsArticle Views7Altmetric-Citations-LEARN ABOUT THESE METRICSArticle Views are the COUNTER-compliant sum of full text article downloads since November 2008 (both PDF and HTML) across all institutions and individuals. These metrics are regularly updated to reflect usage leading up to the last few days.Citations are the number of other articles citing this article, calculated by Crossref and updated daily. Find more information about Crossref citation counts.The Altmetric Attention Score is a quantitative measure of the attention that a research article has received online. Clicking on the donut icon will load a page at altmetric.com with additional details about the score and the social media presence for the given article. Find more information on the Altmetric Attention Score and how the score is calculated. Share Add toView InAdd Full Text with ReferenceAdd Description ExportRISCitationCitation and abstractCitation and referencesMore Options Share onFacebookTwitterWechatLinked InReddit PDF (259 KB) SUBJECTS:Manufacturing,Power Get e-Alerts

Against the stand-alone-cost test in U.S. freight rail regulation

The stand-alone-cost test has become an expensive, extensive, and time-consuming component of the regulatory practice of the U.S. Surface Transportation Board in the performance of its statutory duty to protect “captive shippers” from monopoly rail rates. A close examination of the history of its adoption and application suggests only a tenuous connection with its claimed intellectual foundations. It is time to retire this notion and replace it with something simpler and more effective and transparent.

CHLORINE SHIPPERS FEAR RAIL RATE HIKES

A CONGRESSIONAL mandate for rail carriers that haul chlorine and other extremely hazardous materials to install costly new collision-avoidance systems has set off another squabble between chemical shippers and the nation’s freight railroads. The debate is part of a broader dispute over shipping rates. Chemical companies, which rely heavily on freight trains to transport raw materials and deliver their goods, have complained for years that, as a result of deregulation and mass consolidation, big railroad companies now operate as virtual monopolies. Chemical manufacturers, along with utilities and grain producers, argue that railroads charge ever-escalating rates while providing poor and unpredictable service, particularly for “captive shippers” located in areas where only a single rail company operates. Two-thirds of U.S. chemical plants that rely on railroads are served by one freight carrier, according to the American Chemistry Council, an industry trade group. Such captive shippers pay on average 20% mo...

Against the Stand-Alone-Cost Test in U.S. Freight Rail Regulation

The stand-alone-cost test has become an expensive, extensive, and time-consuming part of the regulatory practice of the U.S. Surface Transportation Board in the performance of its statutory duty to protect captive shippers from monopoly rail rates. Worse, a close examination of the history of its adoption and application suggests only a very tenuous connection with its claimed intellectual foundations, the classic works of Faulhaber (1975) and Baumol, Panzar, and Willig (1982). It is time to retire this tool and replace it with something simpler and more effective and transparent.

CHEMICAL SHIPPERS DECRY RAIL MONOPOLIES

UNRELIABLE SERVICE AND HIGH shipping rates charged by the nation's dwindling number of freight railroads are contributing to the increasing cost of chemicals, electricity, and agricultural commodities, critics told a Senate panel last month. The system is broken, and Congress needs to fix it, said J o hn L. Mcintosh, president of chlor-alkali products for Olin Corp. Railroad monopolies are driving a golden spike through the heart of American competitiveness. Testifying before the Surface Transportation & Merchant Marine Subcommittee of the Senate Commerce, Science & Transportation Committee on June 21, Mcintosh said captive shippers—those served by only one railroad—are completely at the mercy of the carrier, and free and fair market forces no longer ride American rails. Without competition, rail carriers have no incentive to deliver efficient, predictable service, said Mcintosh, who testified on behalf of the American Chemistry Council. For a captive shipper, regardless of its size or location, ...

Railroad Deregulation and Consumer Welfare

Railroad deregulation under the Staggers Act of 1980 generated rate reductions, service enhancements, and other improvements in economic welfare. These benefits appear to be widely shared. There is a low likelihood that some captive shippers pay rates that exceed the rates they would have paid under regulation, some evidence that some captive shippers have paid rates that regulators would judge “unreasonable,” and strong evidence that captive shippers pay higher rates than non-captive shippers. The source of deregulation’s benefits is as noteworthy as their size and distribution. The principal benefits of railroad deregulation stem from cost reduction, not just a closer alignment of prices with pre-deregulation cost levels.

"Captive Shippers" and the Success of Railroads in Capturing Monopoly Rent

Previous articleNext article No Access"Captive Shippers" and the Success of Railroads in Capturing Monopoly RentP. V. Garrod, and W. MikliusP. V. Garrod Search for more articles by this author , and W. Miklius Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by The Journal of Law and Economics Volume 30, Number 2Oct., 1987 Sponsored by The University of Chicago Booth School of Business and The University of Chicago Law School Article DOIhttps://doi.org/10.1086/467143 Views: 7Total views on this site Citations: 6Citations are reported from Crossref Copyright 1987 The University of ChicagoPDF download Crossref reports the following articles citing this article:Jonathan E. Hughes, Ian Lange WHO (ELSE) BENEFITS FROM ELECTRICITY DEREGULATION? COAL PRICES, NATURAL GAS, AND PRICE DISCRIMINATION, Economic Inquiry 58, no.33 (Apr 2020): 1053–1075.https://doi.org/10.1111/ecin.12896James M. MacDonald, Linda C. Cavalluzzo Railroad Deregulation: Pricing Reforms, Shipper Responses, and the Effects on Labor, ILR Review 50, no.11 (Oct 1996): 80–91.https://doi.org/10.1177/001979399605000105Robert H. Porter Recent Developments in Empirical Industrial Organization, The Journal of Economic Education 25, no.22 (Jul 2014): 149–161.https://doi.org/10.1080/00220485.1994.10844824Mark L. Burton Railroad deregulation, carrier behavior, and shipper response: A disaggregated analysis, Journal of Regulatory Economics 5, no.44 (Dec 1993): 417–434.https://doi.org/10.1007/BF01065406 Keith T. Poole , and Howard Rosenthal The Enduring Nineteenth-Century Battle for Economic Regulation: The Interstate Commerce Act Revisited, The Journal of Law and Economics 36, no.22 (Oct 2015): 837–860.https://doi.org/10.1086/467299T. Heaps, J. M. Munro, C. S. Wright A location model of grain production and transportation, The Annals of Regional Science 26, no.22 (Jun 1992): 111–134.https://doi.org/10.1007/BF02116364

Rate base and rate of return methodologies for determining reasonable rates for captive rail traffic

Proponents of Stand-Alone Costs (SAC) as the maximum limit on rates for captive rail traffic under the Staggers Act propose to use the replacement Cost Annuity (RCA) methodology to measure SAC rather than the pre-existing ICC rate base methodology, Net original Cost (NOC). The case for using the RCA methodology argues that the resulting very large write-up of the rail industry rate base would not constitute a windfall gain to the carriers and would be economically efficient. The rationale for RCA, however, is based on a number of questionable assumptions. Although the case for RCA denies the relevance of the history of rail regulation, the transition problem cannot be ignored in establishing a reasonable rate for captive shippers in the transition to a less regulated rail industry. A “compensated switch” to Trended Original Cost (TOC) is proposed for the rail industry.