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Discrimination in the rail rate structure for grain shipments before and after the Staggers Act
Abstract
The passage of the Staggers Act in 1980 gave U.S. railroads significant rate-making flexibilities, including the right to negotiate rates and other terms of trade with individual shippers. These new pricing freedoms afford railroads major opportunities for rationalizing outmoded rate structures and, through the effects of rates on patterns of traffic, for reducing costs of transport. At the same time, however, some shippers, prominent among them country grain elevator operators, have expressed concern that these pricing freedoms are leading to discriminatory abuses of the sort which prompted regulation in the first place in 1887. Ordinary least squares procedures were used to analyze the structure of price-cost ratios of grain shipments, both before and after the passage of the Act. Tests for differences in the means and variances of price-cost ratios over time were used in assessing overall intensity of discrimination over time. The findings shed light on how both level and pattern of discrimination have changed over time. Results point to a greater degree of discrimination, following the Staggers Act, lodged against smaller shippers and against grain shipments moving over hauls where railroads have the most market power. Commodity discrimination, traditionally directed against the higher valued of the grains and, in the immediate pre-Staggers era at least, against shorter-haul shipments, decreased in intensity. The pattern of discriminatory price differentials between high- and low-density hauls, although it varied across regions and commodities, was generally unaffected by the railroads' increased rate-making freedom. But, while findings indicate discrimination remains a significant factor in railroad pricing policy and although the emerging pattern of discrimination appears to be more consistent with railroad profit-maximizing behavior, the intensity of discrimination on average has declined. Results suggest on balance a growing competitiveness of rail rates for grain shipments and a decline in the overall degree of price discrimination following deregulation.
Subject Area
Agricultural economics
Recommended Citation
Falcon, Elmo Tumaneng, "Discrimination in the rail rate structure for grain shipments before and after the Staggers Act" (1989). ETD collection for University of Nebraska-Lincoln. AAI9013606.
https://digitalcommons.unl.edu/dissertations/AAI9013606