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Service Quality and Motor Carrier Costs: An Empirical Analysis

W Bruce Allen and Dong Liu

The Review of Economics and Statistics, 1995, vol. 77, issue 3, 499-510

Abstract: This paper overcomes the long-standing problem of measuring motor carriers' service quality by utilizing service quality data collected from shippers. A service quality controlled cost function is estimated for a sample of less-than-truckload motor carriers. It is shown that excluding service quality variables from cost estimation significantly underestimates carriers' scale economies. These scale economies enable large carriers to offer higher quality services at competitive or even lower costs than small carriers. Copyright 1995 by MIT Press.

Date: 1995
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The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

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