Against the Stand-Alone-Cost Test in U.S. Freight Rail Regulation

16 Pages Posted: 11 Apr 2010  

Russell W. Pittman

U.S. Department of Justice - Economic Analysis Group; Kyiv School of Economics; New Economic School (NES)

Date Written: April 9, 2010

Abstract

The stand-alone-cost test has become an expensive, extensive, and time-consuming part of the regulatory practice of the U.S. Surface Transportation Board in the performance of its statutory duty to protect "captive shippers" from monopoly rail rates. Worse, a close examination of the history of its adoption and application suggests only a very tenuous connection with its claimed intellectual foundations, the classic works of Faulhaber (1975) and Baumol, Panzar, and Willig (1982). It is time to retire this tool and replace it with something simpler and more effective and transparent.

Keywords: railroads, freight, regulation, Stand Alone Cost Test, Surface Transportation Board

JEL Classification: K23, L51, L92

Suggested Citation

Pittman, Russell W., Against the Stand-Alone-Cost Test in U.S. Freight Rail Regulation (April 9, 2010). Available at SSRN: https://ssrn.com/abstract=1587004 or http://dx.doi.org/10.2139/ssrn.1587004

Russell Pittman (Contact Author)

U.S. Department of Justice - Economic Analysis Group ( email )

450 5th St. NW
Antitrust Division
Washington, DC 20530
United States
202-307-6367 (Phone)
202-307-3372 (Fax)

Kyiv School of Economics ( email )

vul. Yakira, 13, 3d floor, suite 334
Kyiv, 04119
Ukraine

New Economic School (NES) ( email )

47 Nakhimovsky Prospekt
Moscow, 117418
Russia

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