Understanding Railroad Investment Behaviors, Regulatory Processes, and Related Implications for Efficient Industry Oversight

Mark Burton () and Charles Sims
Additional contact information
Mark Burton: University of Tennessee

Review of Industrial Organization, 2016, vol. 49, issue 2, No 6, 263-288

Abstract: Abstract Current Surface Transportation Board methods rely on comparisons between revenue needs and the revenues that are earned by railroads. This paper reconsiders the methods that are used to determine this “revenue adequacy”. Specifically, we consider whether the cost of railroad capital might be better estimated through methods that incorporate a “real-options” perspective. While not definitive, our current work suggests that the irreversible nature of many railroad capital expenditures supports a real-options approach and that such an approach could potentially improve assessments of railroad cost of capital. Further, we conclude that applying a real-options methodology also can measurably improve policy-makers’ broader understanding of when, where, and how railroads choose to create new freight capacity.

Keywords: Real options; Cost of capital; Surface Transportation Board; Sunk costs (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11151-016-9519-y Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:revind:v:49:y:2016:i:2:d:10.1007_s11151-016-9519-y

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11151/PS2

DOI: 10.1007/s11151-016-9519-y

Access Statistics for this article

Review of Industrial Organization is currently edited by L.J. White

More articles in Review of Industrial Organization from Springer, The Industrial Organization Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().