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UBC Theses and Dissertations

An analysis of factors influencing railway freight rates Shepherdson, Stephen Dwight

Abstract

The level of any particular railway freight rate is a function of the interaction between cost and demand factors for the movement of the commodity from one location to another. The purpose of this thesis is to analyse cost and demand factors influencing railway freight rates. The study focuses on three areas: 1) the determination of the joint effect of a number of factors on the rate; 2) three rate issues; and 3) the strength and weaknesses of the CTC Waybill Analysis to explain trends in rates. The analysis ranges in scope from a description of cost and demand factors affecting rates to a statistical analysis. The subjective nature of rate-making, the polarized views concerning cost- or demand- based pricing, and the impact of public policy on rate-making are discussed in Chapter 2. The theoretical relationship between a factor and the rate is described for a large number of factors in this chapter as well. The third chapter describes six rate categories. Two of these rate categories are mode-competitive rates and one is based upon specific market competitive factors. Temporal changes in these rate categories are noted in an attempt to explain the relative importance of cost and demand factors over time. In the fourth chapter the available data are examined and two rate models are postulated. These rate models are used to assess some of the issues concerning rates. Chapter 5 presents the statistical results of the study. From these results, a proposal is made for explaining trends in rates by monitoring changes in identified, significant factors over time. The study concludes that the joint effect of a number of factors is important in defining the level of a rate. All factors are not equally important and the significant factors vary for different regional movements. The results of this study indicate that both cost and demand factors are significant for explaining differences in rates. Cost factors are more significant than demand factors in all movement models examined. The value of the commodity is significant in some cases, but intermodal competition and market competition are also significant. The study concludes that the Waybill Analysis data are useful for making a detailed analysis of factors influencing rates. The analysis of a number of factors is considered to be a superior method to that of examining one aggregate measure, average revenue per ton-mile, for explaining trends in rates.

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