DECISION-MAKING IN THE MOTOR CARRIER INDUSTRY

Distinct discrete decisions made by the same economic actor are likely to be correlated, particularly those decisions involved in transporta tion demand. These correlations may be due to economic interactions am ong the decisions, or to heterogeneity, or both. This paper develops a n econometric method that can distinguish among these possibilities an d applies this method to analyzing motor carrier deregulation. One ove rall goal of the Motor Carrier Act of 1980, which substantially reduce d federal regulation, was to promote greater competition in the indust ry. Other things equal, the more competition in an industry, the less concentration. However, concentration has been increasing among genera l freight carriers since deregulation. The positive correlations found between the decisions to acquire broker authority and to be a general freight carrier could be due to joint economies between broker author ity and general freight carriage, in which case the two interact as ec onomic complements, or to heterogeneity among motor carrier licensees. In the first case, but not the second, deregulation of broker authori ty could lead to increased concentration in the general freight sector . Empirically, we find that the decisions are correlated due to hetero geneity, but do not interact. Thus, increased concentration in the gen eral freight sector must be attributed to other causes.