RAILROAD DIFFERENTIAL PRICING IN UNREGULATED TRANSPORTATION MARKETS -A KANSAS CASE-STUDY

Many studies have demonstrated that railroads practiced differential p ricing in the railroad pre-deregulation period. This has been attribut ed to the high percentage of fixed-common costs and factor indivisibil ities of railroads as well as their ability to separate markets by com modity and region. These railroad cost and demand characteristics are as much in evidence today as they were prior to 1980. However, empiric al studies of grain transport markets have shown that increased intra railroad competition under deregulation led to declines in rail grain prices in the first half of the 1980s. This suggests that railroads ma y not be able to employ differential pricing as much in competitive an d unregulated transportation markets. Using data from the second half of the 1980s, analysis indicates that railroads practice differential pricing in the unregulated Kansas wheat transportation market. This is true for both the intra Kansas and Kansas export wheat transportation markets, although the determinants of railroad differential prices ar e different in the two markets.