Friday, February 16, 2018

Trucking Costs

One little tidbit in this WSJ story on Tyson's earnings has to do with them passing on to customers the rising MC of trucking transport:
Short-term prices to secure some big rigs have jumped 20% as a result, and long-term shipping contract rates are projected to climb between 5% and 8% this year.

This provides an opportunity to test the relative competitiveness of various downstream industries. We know that the simple pricing rule is (P-MC)/P = 1/|e|. In a more competitive industry, firm's demand curves are more elastic. At one extreme 1/|e| = 1 for a monopolist and at the other, 1/|e| is zero for a perfectly competitive industry. For the former, P should rise with 0.5*MC and for the latter P should rise with 1.0*MC (the math is left as an exercise for the reader). So, for different industries and firms, is the "pass through rate" closer to 0.5 or 1.0?


  1. You provide such a great service. People can get good information from your article and sell a junk car to any right scrap car removal ipswich company and get good cash for their cars.

  2. The article has been very helpful and very informative. It provided people with new ideas about cheap tyres logan