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[quote user="Datafever"][quote user="futuremodal"] [quote user="Datafever"]Could someone provide me with a definition of cross subsidization as it applies to railroad pricing? In my mind, a LOB is only being cross subsidized if revenue is less than variable costs.  From the posts on this thread, it appears that there are other definitions being used.  Anyone? [/quote] The STB standard is 180% of revenue to variable cost.  Thus, in the railroad context any rate structure which results in an R/VC of less than 180% is probably being cross subsidized by the rate structure in which revenues exceed variable costs by more than 180%.  Compare that to your statement above, where you believe cross subsidization only happens when revenues are less than 100% of variable costs.  For the record, the lowest R/VC ratio that I know of is 108%, so by your definition there is currently no cross subsidization taking place. Whether the 180% measure itself is too arbitrary is another discussion altogether. [/quote] I am aware that the STB uses the 180% value to determine potential captive shippers (per Staggers), but I have not read anything that would indicate that the 180% value is used to define cross subsidization.  Would you happen to have any links to information that would validate that? If one shipper pays 181% R/VC and another shipper pays 179% R/VC, would you say that cross subsidization has taken place?  If that were a valid criteria, then any shipper that paid a higher R/VC percentage would be cross subsidizing any other shipper that paid a lower R/VC regardless of the actual percentage. I wouldn't say that what I stated was a definition, per se.  It just kind of "makes sense" to me.  After all, if an LOB is actually losing money (not covering the variable costs) then I think that it is inarguable that such LOB is being cross subsidized by the rest of the business. The reason that I brought it up is because the various posts that have been made seem to indicate that not everyone is on the same wavelength as to what cross subsidization really means in this context. [/quote] The 180% standard is used to determine revenue adequecy.  Thus, any rate structure below 180% R/VC supposedly does not cover all costs (variable, fixed, etc.) of the move, so we presume such would have to be made up for by someone else's rate structure which exceeds the standard. The fact that the GAO uses this standard for the totally unrelated purpose of *determining* captive shipper status just means that some ivory tower beauracrats are too lazy to use the more logical method of determining captivity, aka the physical limitation to one Class I service provider.
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