BIDDING ON RAILCARS FOR GRAIN: A STRATEGIC ANALYSIS
William W. WILSON
Bruce L. DAHL
Many of the U.S. railroads have introduced highly differentiated services for grain shipments in recent years, generally in the area of forward guaranteed car service. Taken together with other alternatives, these mechanisms have had the effect of establishing priority allocations among shippers. In most cases, pricing and allocation of these services has been with some type of bidding mechanisms. This paper explores the economic implications of these mechanisms on the grain shipping industry. A model was developed to identify factors affecting the value of these services and was analyzed in the context of a typical midwestern grain shipment. A game theory model of competitive bidding was also developed to analyze the effects of critical strategic variables on equilibrium outcomes.
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