Derivation of regional shadow prices

[Hurter and Moses, 1964] presented a solvable model combining input-output analysis and linear programming to derive regional product ’shadow’ prices. Their measure of prices is incomplete since it includes only regional variation-in transport and resource costs and not the intermediate product costs. The reason for this exclusion is obvious: product prices are needed to obtain intermediate product costs. In this note we extend the Hurter-Moses model to derive a full measure of regional shadow prices.     

The Union Pacific/Southern Pacific Railroads Merger: Effect of Trackage Rights on Rates

We investigate the impact of the 1996 UP/SP railroads merger on rail rates for potential 2-to-1 shippers. As part of its merger conditions, the Surface Transportation Board (STB) granted trackage rights to BNSF to preserve competition for these shippers. Using the STBs Carload Waybill Sample data for the Salt Lake City economic area, we found that the remedy was effective—BNSF provided more effective competition to UP in the post-merger era than SP did in the pre-merger era. The results, however, differed by commodity, direction of traffic, and shipper-type.