Institutional Impediments to Efficiency: The Case of Rail Freight Car Supply

Research is reported which resulted from efforts to estimate savings which might accrue to the railroad industry from a proposal for market pricing of freight car use. The article examines the impact of present car-pricing and distribution regulations on the supply of railroad freight cars, and estimates the diseconomies incurred by the railroads collectively as a result of these policies. Only the external effects generated by improper pricing and car distribution rules are considered here. Except for excessive empty car mileage and excess peak capacity, other inefficiencies thought to exist in rail operations are not considered.