An Econometric Analysis of Intermodal Competition

In recent years economic reform has been implemented, or contemplated, in many economic sectors in the European Union. The transportation sector in Germany is no exception. To understand the consequences of reform, one must begin by characterizing the pre-reform nature of the relationship between prices and marginal costs in the industry. This study has been designed to assess the extent to which price deviates from marginal costs in selected sectors of the West German transport industry. A fully specified theoretical model has been developed that allows us to examine the nature of the relationship between price and marginal cost, and estimate a model consistent with the theoretical structure. With the unification of Germany, the question of further deregulation and privatization of these modes has assumed even greater importance. The results of this study can provide some important policy implications for further deregulation. The analysis in this book should be useful for students and policy makers alike who might be interested in understanding the efficacy of deregulation and privatization proposals for different industries, whether in Europe or elsewhere.