| Freight transportation services are used by the firms in their production process--in procuring intermediate inputs from suppliers and in distributing final products to profitable markets. The firm's basic production and transportation decisions comprise, respectively: (1) the type and quantity of each input and output for a given production technology; and, (2) the location(s) of supplier(s)/distributor(s), transportation mode(s), and shipment size(s) for each input and output. The firm's optimal decisions can be determined by simultaneous or block-recursive decision process.;The simultaneous model is estimated for U.S. Steel Industry (SIC 3312) using 1977 Commodity Transportation Survey. The results in the single-choice case show the correct economies of scale in prices. Where applicable, the price elasticities were comparable to those obtained from the past freight demand studies. In general, the elasticities were lower for the choice-bundle case. This is a direct result of having a more continuous mix of discrete alternatives available. The results also display some empirical justification for simultaneous decision structure in the firm's overall production and transportation decision process.;A set of nested logit models are formulated for the firm's transportation decision variables under both simultaneous and block-recursive assumptions. The utility function is derived from the firm's minimum cost function in the form of translog approximation. Both the conventional single-choice case and the "choice-bundle" case, i.e., more than one discrete alternatives are selected contemporaneously, are considered. |
