Railroad Deregulation and Rail Rates: A Disaggregated Analysis

This investigation first provides a highly disaggregated study of deregulated railroad rates for seventeen commodities. The results indicate that the Staggers Rail Act fundamentally altered the way in which rail carriers price their services. Rates now adhere more closely to incurred costs and exhibit a heightened sensitivity to the presence of both intermodal and intramodal competition. The model is then extended to accommodate the possibility of shipper responses to changed carrier behavior. The results of this extension suggest that shippers have responded eagerly to altered railroad behavior by changing the characteristics of their shipments. Together, the changes in railroad behavior and shipper responses to these changes have produced lower railroad rates for the movement of many commodities. At the same time, there is no evidence that rates for even a single commodity have been made higher by deregulation.