Abstract
This chapter is addressed to the central pricing issues involved in partial deregulation of railroad rates. It enunciates principles to guide regulatory oversight of the rate setting of unsubsidized railroads — principles that are consistent with economic analysis and that are essential for protection of the public interest. The paper is largely motivated by the Staggers Rail Act, recently passed by the Congress of the United States, which mandates both an end to periodic Federal subsidies to railroads and continuing regulatory oversight of railroad rates. Nevertheless, the principles espoused here are equally germane wherever partial deregulation of railroads, or other utilities, is at issue.
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Notes and References
As put by A. E. Kahn: ‘The only economic function of price is to influence behavior. This is a notion that traditional regulators have great difficulty accepting.’ Public Utilities Fortnightly, 101, 13–17 (19 January 1978). See any economics textbook for a detailed exposition — for example, W. J. Baumol and A. S. Blinder, Economics: Principles and Policy (New York: Harcourt, Brace, Jovanovich, 1979 ) pp. 590–602.
See R. D. Willig, ‘Pareto-superior Nonlinear Outlay Schedules’, The Bell Journal of Economics, 9, 56–69 (Spring 1978 ).
See R. Braeutigam, (1979) ‘Optimal Pricing With Intermodal Competition’, American Economic Review, 69, 38–49.
W. J. Baumol, J. C. Panzar and R. D. Willig (1982) Contestable Markets and the Theory of Industry Structure (New York: Harcourt, Brace, Jovanovich).
W. J. Baumol, E. D. Bailey and R. D. Willig, ‘Weak Invisible Hand Theorems on the Sustainability of Prices in a Multiproduct Monopoly,’ American Economic Review, 67, 350–65 (June 1977).
See R. D. Willig, ‘Multiproduct Technology and Market Structure’, American Economic Review, 79, 346–51 (May 1979).
See Faulhaber, op. cit. and R. D. Willig (1980) ‘What Can Markets Control?’, in Perspectives on Postal Service Issues, R. Sherman (ed.) ( Washington, DC: American Enterprise Institute ).
The classic treatment is A. C. Pigou (1928) A Study of Public Finance, ( 3rd edn) (London: Macmillan, 1947 ).
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© 1983 Jörg Finsinger
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Baumol, W.J., Willig, R.D. (1983). Pricing Issues in the Deregulation of Railroad Rates. In: Finsinger, J. (eds) Economic Analysis of Regulated Markets. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-17099-9_2
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DOI: https://doi.org/10.1007/978-1-349-17099-9_2
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