Pricing in a Deregulated Environment: The Motor Carrier Experience

A major policy goal of the Motor Carrier Act of 1980 was to provide the shipping public with more efficient truck freight rates. Unlike previous studies, which have focused on intrastate reforms or highly aggregated data, this article analyzes dynamically the effects of the act on the freight rates of Class I and II common carriers of general freight. In addition to estimating rate equations, we have estimated cost functions to derive reliable measures of marginal cost. The specified rate equation also includes variables expected to affect the elasticity of demand. Simulations indicate that deregulation has reduced rates from the very beginning and that the effect has grown over time. By 1983, reductions are conservatively in the 15-20% range and in the 25-35% range by 1985.