ESTIMATING SERVICE-DIFFERENTIATED TRANSPORT DEMAND FUNCTIONS

Abstract

This paper develops a methodology for estimating the demand for freight transport based on a model of the shipper's decision-making process. Conditions of optimality are used to specify a choice model--subject to some assumptions about the shipper's response to the risks incurred by using the transport system. This model is expanded to allow for testing for imperfection in the goods markets. If such imperfection exists, a technique is proposed that involves generating a posterior on shipment size and the estimated choice model. The resulting expectation of the posterior, when used in combination with industry supply functions, produces demand equations. Finally, market equilibria--where demand equals supply--are computed. /Author/