| This dissertation is about the pricing behavior of railroads in the coal transportation market in the United States (U.S.), with special reference to the transportation of coal to electric utilities. First, the magnitude of the difference between price and marginal cost of hauling coal is determined and analyzed. Second, indices of market power are computed using price and marginal cost information. Finally, factors that determine the magnitude of the price-cost margins are examined.; The theory and measurement of market power is discussed as well as the theory of railroads' cost estimation. Railroads' cost data from the annual Analysis of the Class I Railroads, published by the Association American Railroads (AAR) were collected, as were electric utilities' contract coal data from Coal Transportation Rate Database (CTRBD) published by the Energy Information Administration (EIA).; Using AAR data, parameters of a railroad's translog cost function are estimated. From the estimated cost function, marginal cost of hauling coal is calculated. Together with the rate/price data from the CTRDB, the magnitude of the difference between price and marginal cost, as well as market power indices are computed and examined. The price-cost margins are found to be high, suggesting non-competitive behavior on the part of railroads.; Finally, further econometric analysis is carried out on the determinants of price-cost margins. The CTRDB contains data on a variety of variables that determine the price-cost margins. The length of contract as well as utilities' countervailing power as measured by the size of the utilities, are found to be negatively correlated with price-cost margins. Bargaining power of railroads as measured by railroads' market share of coal is found to be positively correlated with price-cost margins. |
