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COAL RAIL PRICES DURING DEREGULATION : A HEDONIC PRICE ANALYSIS

Frederick C. Dunbar, J S Mehring

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Abstract

Hedonic price indices for coal rail transportation are developed and applied to show what happened to rail prices from 1973 through 1983, a period that contains major deregulation legislation: the 4-R Act of 1976 and the Staggers Act of 1980. The paper shows that: (1) it is possible to develop coal rail price indices that control for shifts in distance and tonnage that occurred during deregulation; (2) the average annual percentage increase in rail prices between 1973 and 1983 was higher than the rail cost inflation, primarily during the first half of the period, suggesting that railroads were quick to take advantage of pricing freedom; and (3) coal rail price changes for state origin-destination pairs do not follow secular rail cost changes but are, instead, consistent with railroads establishing rates based on demand conditions.

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What this paper is about

Hedonic price indices for coal rail transportation are developed and applied to show what happened to rail prices from 1973 through 1983, a period that contains major deregulation legislation: the 4-R Act of 1976 and the Staggers Act of 1980. The paper shows that: (1) it is possible to develop coal rail price indices that control for shifts in distance and tonnage that occurred during deregulation; (2) the average annual percentage increase in rail prices between 1973 and 1983 was higher than the rail cost inflation, primarily during the first half of the period, suggesting that railroads were quick to take advantage of pricing freedom; and (3) coal rail price changes for state origin-destination pairs do not follow secular rail cost changes but are, instead, consistent with railroads establishing rates based on demand conditions.

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Available abstract

Hedonic price indices for coal rail transportation are developed and applied to show what happened to rail prices from 1973 through 1983, a period that contains major deregulation legislation: the 4-R Act of 1976 and the Staggers Act of 1980. The paper shows that: (1) it is possible to develop coal rail price indices that control for shifts in distance and tonnage that occurred during deregulation; (2) the average annual percentage increase in rail prices between 1973 and 1983 was higher than the rail cost inflation, primarily during the first half of the period, suggesting that railroads were quick to take advantage of pricing freedom; and (3) coal rail price changes for state origin-destination pairs do not follow secular rail cost changes but are, instead, consistent with railroads establishing rates based on demand conditions.

Key concepts: Deregulation, Tonnage, Coal, Economics, Inflation (cosmology), Legislation, Agricultural economics, Market economy

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