The Interstate Commerce Commission's rules for rate making have traditionally emphasized considerations of equity rather than economic efficiency. A theory for efficient pricing can be advanced as a means of improving the allocation of transportation resources. This paper summarizes two possible pricing schemes. Under the first, called totally regulated second best (TRSB), prices and entry are controlled for all modes to maximize economic efficiency while allowing a mode with economies of scale to break even. Under the second, called partially regulated second best (PRSB), modes without economies of scale are unregulated, and price and entry controls are imposed on a mode with economies of scale in order to maximize economic efficiency for all transportation activities. The paper compares PRSB and TRSB in terms of the potential information requirements, administrative costs, and problems in implementation and shows why each may be of interest as a public policy alternative. Finally, the paper contrasts the actual tariffs in the U.S. rail industry in 1961 with the rules for efficient pricing suggested by the PRSB alternative. The analysis suggests that the rail rates for agricultural commodities may have been too low and that the rail rates for manufactured commodities may have been too high to be economically efficient. /Author/

Media Info

  • Media Type: Print
  • Features: Figures; References; Tables;
  • Pagination: pp 32-38
  • Monograph Title: Surface transport regulation and railroad planning
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00196875
  • Record Type: Publication
  • ISBN: 0309028329
  • Files: TRIS, TRB
  • Created Date: Aug 28 1979 12:00AM