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Demand for freight transportation with a special emphasis on mode choice in Canada

University of British Columbia

This thesis derives a freight transportation demand model consistently with neoclassical economic theory: a shipper is assumed to minimize total cost of production and distribution with a given output that has to be delivered to various destination markets. With some further assumptions on the shipper's production technology, it is possible to express the shipper's transportation sectoral unit cost as a function of freight rates and quality attributes of service and length of haul. Four alternative forms of the transportation sectoral unit cost function are hypothesized. These cost functions are specified in the translog form, and corresponding modal revenue share functions are derived. Each system of the cost and share functions is estimated jointly by a maximum likelihood (ML) method, separately for each of the eight commodity groups selected from the cross-sectional data of Canadian inter-regional freight movements during the year 1970. Results of the hypothesis testing has shown that the quality attributes of service have significant impact on the mode choice of manufactured products but not of bulk commodities and raw materials. The parameter estimates of the cost and share functions are used to measure the elasticity of substitition and the elasticities of demand with respect to freight rates and quality attributes of service. Both price and quality elasticities of demand vary substantially from commodity to commodity and from link to link. For each commodity group, the price elasticities of the rail and truck modes are used to identify the distance range over which an effective rail-truck competition exists. For the relatively high-value commodities, the short-haul traffic is largely dominated by the truck mode, and the significant rail-truck competition exists only in the medium and long-haul markets. On the other hand, for the relatively low-value commodities, the effective rail-truck competition exists only in the short-haul markets leaving the medium and long-haul markets largely rail-dominated.

Text

2010-03-15

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http://hdl.handle.net/2429/21927

Business Administration

University of British Columbia

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