Date of Award
Master of Business Administration (MBA)
Master of Business Administration
Michael J. O'Hara
In 1980, the railroad industry was deregulated due to poor industry performance as well as an ideological shift. The newly developed contestable market theory provided the political justification for deregulating what was previously perceived as a natural monopoly. The theme of this study is the examination of whether contestable market conditions exist in the U.S. surface transportation industry which are sufficient to justify giving up direct governmental involvement in the railroad industry. The main generic market structures that play an important role in the regulatory discussion are introduced and implications for regulatory intervention in the case of railroads are drawn. The market structures examined are the perfect competition model, the natural monopoly, the contestable market theory and the cartel. Next, the history of railroad regulation and the changing position of railroads in the surface market is described. This history ranges from beginning of regulation in 1887 up to its abolishment in 1980. The outcomes of railroad deregulation regarding market concentration and operations are analyzed and key factors of railroad profitability are determined. Some consideration is given to the regulatory environment of other surface transportation modes, mainly the trucking industry, because the intermodal market is the relevant market for contestability. The intermodal transportation market which has grown rapidly since deregulation is described and analyzed. The present railroad market is segmented. The segments are examined for their degree of contestability. Particular markets are introduced. E.g., the market extremes of transportation of wheat out of the Northern Plains and intermodal container traffic in the Ohio River Valley are examined for “fit” of the Contestable Market Theory. Open-access as a suitable alternative form of railroad regulation is discussed. This study finds that no railroad market segment is contestable and hence that railroad deregulation based on contestable markets is not justified.
Koeppe, Johannes Christian, "Competitive Issues in the Deregulated United States Railroad Industry" (1997). Student Work. 1363.
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