Rent and Regulation in Unit-Train Rate Determination

Abstract

Railroads and utilities bargain over rates for hauling coal. In the past, the price of alternative fuels has served to limit those rates. Recently, these limits have been raised by regulation-induced shortages in natural gas, cartel-induced price rises of oil, and environmental opposition to nuclear power. This article estimates a model of the rate making process and examines how the process has responded to increased prices of alternative fuels. The results indicate that railroads have been moderately successful in taking advantage of these higher prices. However, their success is increasingly leading to challenges before the Interstate Commerce Commission.