Wednesday, February 19, 2020

Measuring rail market power in wheat transportation

By: Su, ChiNolan, James
Abstract: Many previous studies of rail market power in bulk transportation either focus the analysis at a national level or apply methods to analyze railway market behavior that are not always reliable. While railroads often appear competitive over bulk movements when evaluated on a national level, we offer that any exertion of market or duopoly power by a railway—if present—would be most likely to occur in local or regional markets where there is limited to no intramodal or intermodal competition. In addition, much of the prior research on rail market behavior relies on estimated railroad (marginal) costs, which are themselves unreliable and in turn generate questionable assessments of actual railway market power. To help shed light on this issue with respect to U.S. wheat transportation, this research evaluates regional-level market structure changes in two separate, high-volume wheat transportation corridors served by a rail duopoly. These are: (1) wheat moving from North Dakota to Minnesota; and (2) wheat moving from Kansas/Oklahoma to Texas. By assessing the nature of duopoly market power in these particular rail markets, the analysis helps support and inform policies designed to improve transportation markets for more captive wheat and grain shippers.

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