Bargaining powers and market segmentation in freight transport

The heterogeneity of services in the freight transport market and the presence of imperfect information motivate the development of an empirical model for detecting market imperfection and bargaining powers of the two agents concluding a contract. The fact that agents typically bargain simultaneously on price and attributes leads to models without exogeneity assumption. The model is accordingly based on estimation of the support of the joint distribution of the price and of the attributes of the transport rather than on expectation of the price conditional to the attributes. The model proposes an innovative and integrated approach for measuring market imperfection and bargaining powers. Furthermore, the paper examines the sensitivity of the results to the choice of attributes and, in order to detect potential market segmentation, to selection of the data. The empirical work is based on a new dataset obtained from a survey based on face-to-face interviews, providing data on the price and qualitative attributes of a set of actual contracts negotiated on the Belgian freight market. Copyright © 2007 John Wiley & Sons, Ltd.