Please don't acknowledge the trolls. That makes it harder to clean up later. Just report and move on. Locking this thread.
Brian Schmidt, Editor, Classic Trains magazine
Victrola1 What about unit trains? A grain elevator in Listeria is on line A. Line A takes the Listeria Elevator's unit trains to New Orleans directly. The Listeria Elevator has figured it can get a better deal in Houston. Line A does not go to Houston. Line A's rate to reach Houston makes shipping there unattractive. Not far from Listeria Line B has a direct route to Houston. Would the proposed switching rule encourage Line B to go after the business?
What about unit trains?
A grain elevator in Listeria is on line A. Line A takes the Listeria Elevator's unit trains to New Orleans directly. The Listeria Elevator has figured it can get a better deal in Houston. Line A does not go to Houston.
Line A's rate to reach Houston makes shipping there unattractive. Not far from Listeria Line B has a direct route to Houston.
Would the proposed switching rule encourage Line B to go after the business?
Victoria 1,
My first thought is no. While it would have been nice to know origin city and state so had some idea of the length of haul, and thus some indication of rates, plus if is single car, 25-26 car blocks, or full trains of over 100 cars, the basic analysis is the same.
Export rates tend to be equalized over a wide range of ports. In the case of Houston and New Orleans the first thing you want to know is whether or not there is a differential in ocean freight. I never dealt with traffic on the Gulf Coast. My first though is no differential. Second thought is a surcharge at New Orleans due to the need to run ships up 100 miles of river. Third thought is a variying differential based on who knows what is going on in ocean freight market.
The fact that the shipper seems to want to go to Houston implies an ocean freight differential in favor of Houston. Lets assume a 10 cent per bushel spread, and 3600 bu/car (110 ton car with wheat at 60#/bu. Yes, I know actual commodity is probably rice or soybeans but I know the figures for wheat off the top of my head.)
That makes the most the elevator will pay B is the New Orleans rate plus $360 per car. Since the origin switch charge will be in that same range, B has little, if any, incentive to go after this traffic, particularly if his mileage is more than A's to NOL. Port terminal costs also play in. Houston will probably involve a switch by PTRA, NOL perhaps a switch by the Public Belt. Without looking these tariff rates up, which I do not care to do, I can not tell what the cost impact of port switching is as between A and B.
My answer is NO, B is not interested on the basis of simple economics. Second answer is there is no money in pi$$ing A off, so no reason to do it. Third answer is NO becuase I do not need to start a rate war that will benefit someone who will desert me for 1 cent a bushel.
Mac
PNWRMNM Euclid I am amazed at the number of competing issues on this topic of competitive switching. While I prefer free market principles to rule business, reciprocal switching mandated by the government does not exactly strike me as free market competition. I expect that it would not work as intended and the attempt to further modify it to make it work, could easily lead to a slippery slope back to re-regulation. Here is some enlightenment on the position of agricultural interests who oppose reciprocal switching: http://www.agri-pulse.com/Agriculture-groups-oppose-rail-shipping-proposal-03152013.asp Read more carefully, the grain and feed guys are opposed because the proposal does not go far enough. Note that they also understand that the "railroad B" may refuse to play the shipper's game. Mac
Euclid I am amazed at the number of competing issues on this topic of competitive switching. While I prefer free market principles to rule business, reciprocal switching mandated by the government does not exactly strike me as free market competition. I expect that it would not work as intended and the attempt to further modify it to make it work, could easily lead to a slippery slope back to re-regulation. Here is some enlightenment on the position of agricultural interests who oppose reciprocal switching: http://www.agri-pulse.com/Agriculture-groups-oppose-rail-shipping-proposal-03152013.asp
I am amazed at the number of competing issues on this topic of competitive switching. While I prefer free market principles to rule business, reciprocal switching mandated by the government does not exactly strike me as free market competition. I expect that it would not work as intended and the attempt to further modify it to make it work, could easily lead to a slippery slope back to re-regulation.
Here is some enlightenment on the position of agricultural interests who oppose reciprocal switching:
http://www.agri-pulse.com/Agriculture-groups-oppose-rail-shipping-proposal-03152013.asp
Read more carefully, the grain and feed guys are opposed because the proposal does not go far enough.
Note that they also understand that the "railroad B" may refuse to play the shipper's game.
I see what you mean. I had interpreted the article to mean that the grain and feed guys were complaining that the introduction of competition into the transportation market in a way that affects so few customers would upset the balance of competion in the grain and feed market.
PNWRMNM schlimm I wonder what the name is for somebody who plays dumb and then when he disagrees with them, goes after posters with ad hominem attacks? No, its name is Schlimm, the foremost practioner of the art. At last we find something you know about. Mac
schlimm I wonder what the name is for somebody who plays dumb and then when he disagrees with them, goes after posters with ad hominem attacks?
I wonder what the name is for somebody who plays dumb and then when he disagrees with them, goes after posters with ad hominem attacks?
No, its name is Schlimm, the foremost practioner of the art. At last we find something you know about.
Really clever! Such sharp wit!! Better keep your day job, if you still have one.
C&NW, CA&E, MILW, CGW and IC fan
Norm
Amen!!
schlimm I wonder what the name is for somebody who plays dumb and then when he disagrees with them, goes after posters with ad hominem attacks? Answer: A former moderator.
I wonder what the name is for somebody who plays dumb and then when he disagrees with them, goes after posters with ad hominem attacks? Answer: A former moderator.
Thanks to Chris / CopCarSS for my avatar.
sounds "short-tempered, irrelevant, irritable, snide comment" To me!
schlimm Murphy Siding ergo, you've just proved that the term competitive switching does not appear in the section. Not literally, of course, but in context it his the heart of the matter. Where do you think the STB got the idea and basis for its proposal? From outer space? Are you even capable of inferential reading? It is a skill that is sadly in decline in our schools. But more likely, you are engaging in another of your silly games. One thing stands out in this "discussion." Many folks have never read the Staggers Act itself, just about it.
Murphy Siding ergo, you've just proved that the term competitive switching does not appear in the section.
Not literally, of course, but in context it his the heart of the matter. Where do you think the STB got the idea and basis for its proposal? From outer space? Are you even capable of inferential reading? It is a skill that is sadly in decline in our schools. But more likely, you are engaging in another of your silly games.
One thing stands out in this "discussion." Many folks have never read the Staggers Act itself, just about it.
Is there a particular name for your tendency to believe that anybody who doesn't agree with you must be a dummy or is that simply some weird character idiosyncrasy that you carry around on your shoulder?
schlimm Murphy Siding I don't know if I can agree with your line of thinking. If you can add things that aren't there by way of context, then anyone can as well and what do you have? You infer something is in there, I infer it is not. Tie? Thank you for the inferential insult. That skill must have been declining since I graduated high school in 1979. Would you like me to yell at the kids to get off your lawn for you? Maybe this will help. You're never too old to learn: Reading
Murphy Siding I don't know if I can agree with your line of thinking. If you can add things that aren't there by way of context, then anyone can as well and what do you have? You infer something is in there, I infer it is not. Tie? Thank you for the inferential insult. That skill must have been declining since I graduated high school in 1979. Would you like me to yell at the kids to get off your lawn for you?
I don't know if I can agree with your line of thinking. If you can add things that aren't there by way of context, then anyone can as well and what do you have? You infer something is in there, I infer it is not. Tie?
Thank you for the inferential insult. That skill must have been declining since I graduated high school in 1979. Would you like me to yell at the kids to get off your lawn for you?
Maybe this will help. You're never too old to learn: Reading
PNWRMNM Murphy Siding You're making it too difficult. It's not practical to gouge the other guy today, because he would then feel obligated to gouge back tomorrow and payback's a...banana. Murphy, I think you are looking at the wrong end of the transaction. The big deal is not whether the new switch charge is $300 or $500, but the NITL will want it as low as they can con the STB into. Likewise the carriers will want it be as high as possible to help them resist the temptation to poach the newly open traffic from the other guy. The NITL wants expanded reciprocal switching for just one reason, they want to be able to threaten to divert line haul traffic from the newly opened facilities to DRIVE THEIR RATES DOWN. If threats fail then they will divert. Either way the incumbent carrier looses and the shipper gains, just like taking candy from a baby. The point I was trying to make is that the carriers have the ability to nullify this whole production simply by refusing to establish a rate to poach the other guy's traffic. They can do this without any illegal conspiracy simply by keeping the knives sheathed, which is what NITL obviously does not want. Think about the Cold War doctrine of Mutual Assured Destruction. Logically the NITL plan is to set up that game. The question is whether the railroads will be smart enough NOT to play. In the regulated days this plan to separate the railroads from their money would not work since the rates on every commodity from every point to every other point were equalized regrdless of route AS A MATTER OF LAW. In those days reciprocal switching enabled shippers to reach points not on the origin road, or to use a route with supperior service, and enabled the rail system, taken as a whole, to provide the economy with a wide variety of route options. Since there were so many customers and routes, I suspect in most cases it was not worth the clerical effort to identify "reprisal" switches and find out what the customer's issue was. Of course the carriers had field marketing guys who could take a customer out to lunch. No such thing now. Mac
Murphy Siding You're making it too difficult. It's not practical to gouge the other guy today, because he would then feel obligated to gouge back tomorrow and payback's a...banana.
You're making it too difficult. It's not practical to gouge the other guy today, because he would then feel obligated to gouge back tomorrow and payback's a...banana.
Murphy,
I think you are looking at the wrong end of the transaction. The big deal is not whether the new switch charge is $300 or $500, but the NITL will want it as low as they can con the STB into. Likewise the carriers will want it be as high as possible to help them resist the temptation to poach the newly open traffic from the other guy.
The NITL wants expanded reciprocal switching for just one reason, they want to be able to threaten to divert line haul traffic from the newly opened facilities to DRIVE THEIR RATES DOWN. If threats fail then they will divert. Either way the incumbent carrier looses and the shipper gains, just like taking candy from a baby.
The point I was trying to make is that the carriers have the ability to nullify this whole production simply by refusing to establish a rate to poach the other guy's traffic. They can do this without any illegal conspiracy simply by keeping the knives sheathed, which is what NITL obviously does not want. Think about the Cold War doctrine of Mutual Assured Destruction. Logically the NITL plan is to set up that game. The question is whether the railroads will be smart enough NOT to play.
In the regulated days this plan to separate the railroads from their money would not work since the rates on every commodity from every point to every other point were equalized regrdless of route AS A MATTER OF LAW. In those days reciprocal switching enabled shippers to reach points not on the origin road, or to use a route with supperior service, and enabled the rail system, taken as a whole, to provide the economy with a wide variety of route options. Since there were so many customers and routes, I suspect in most cases it was not worth the clerical effort to identify "reprisal" switches and find out what the customer's issue was. Of course the carriers had field marketing guys who could take a customer out to lunch. No such thing now.
I will note that the endless arguments on price have completely ignored the other half of the puzzle, namely service on the long haul portion. Sometimes a shipper is more concerned with reliable handling, or has fought with Railroad A in another corridor and wants to avoid them as much as possible.
John
Euclid schlimm Competition will not always lower prices. Only a fool thinks that. Beware of anyone who reframes a discussion in terms such as "always" and "never" as they are sophistry. But with competitive switching, with at least some competion, there is a higher probability of a market-determined price . In a truly free market, there would be many choices. Rails are like utilities were in terms of supplier of product (as opposed to distributor). Why are you so avoidant of an attempt to make rails more market-sensitive? Your question is just another of your endless word games. When I said there is an unfounded expectation that adding competition will always lower prices, I did not mean that is my expectation, if that is what you mean in your reply. I was referring to it being an expectation of the advocates of reciprocal switching. With them, there seems to be a foregone conclusion that rates are too high. How does anyone know that rates are too high? Certainly, the people who are calling for reciprocal switching believe that rates are too high. They conclude that rates are too high simply because they can see a way to add competition. They believe that competition reduces rates, so from that, they conclude that rates are too high. They have even calculated how much they expect to save. There may be some rate reduction or there may be none. If reciprocal switching does not cause rates to drop, I don’t think the reciprocal switching boosters are going to say, “Well, we were wrong. Rates are not too high, but at least we discovered the truth, and we also added some competition, so that is a good thing. At least we now have choices.”
schlimm Competition will not always lower prices. Only a fool thinks that. Beware of anyone who reframes a discussion in terms such as "always" and "never" as they are sophistry. But with competitive switching, with at least some competion, there is a higher probability of a market-determined price . In a truly free market, there would be many choices. Rails are like utilities were in terms of supplier of product (as opposed to distributor). Why are you so avoidant of an attempt to make rails more market-sensitive? Your question is just another of your endless word games.
Why are you so avoidant of an attempt to make rails more market-sensitive?
Your question is just another of your endless word games.
When I said there is an unfounded expectation that adding competition will always lower prices, I did not mean that is my expectation, if that is what you mean in your reply.
I was referring to it being an expectation of the advocates of reciprocal switching. With them, there seems to be a foregone conclusion that rates are too high. How does anyone know that rates are too high? Certainly, the people who are calling for reciprocal switching believe that rates are too high. They conclude that rates are too high simply because they can see a way to add competition. They believe that competition reduces rates, so from that, they conclude that rates are too high. They have even calculated how much they expect to save.
There may be some rate reduction or there may be none. If reciprocal switching does not cause rates to drop, I don’t think the reciprocal switching boosters are going to say, “Well, we were wrong. Rates are not too high, but at least we discovered the truth, and we also added some competition, so that is a good thing. At least we now have choices.”
For enlightenment, read the scholarly article I linked.
schlimmCompetition will not always lower prices. Only a fool thinks that. Beware of anyone who reframes a discussion in terms such as "always" and "never" as they are sophistry. But with competitive switching, with at least some competion, there is a higher probability of a market-determined price . In a truly free market, there would be many choices. Rails are like utilities were in terms of supplier of product (as opposed to distributor). Why are you so avoidant of an attempt to make rails more market-sensitive? Your question is just another of your endless word games.
Competition will not always lower prices. Only a fool thinks that. Beware of anyone who reframes a discussion in terms such as "always" and "never" as they are sophistry. But with competitive switching, with at least some competion, there is a higher probability of a market-determined price . In a truly free market, there would be many choices. Rails are like utilities were in terms of supplier of product (as opposed to distributor).
schlimmI suggest you examine market economics. The point of competition (not monopolies) is the lowest prices consistent with customer demand and supplier production/offers. If there is only one railroad, or utility, that is a monopoly, period, by any definition. And the price curve is thus distorted.
You are missing my point. I am not denying the market benefits of competition.
My point, in the application of reciprocal switching, is that there is an unfounded expectation that adding competition will always lower prices. That is not economics. Economics states that competition will prevent prices from becoming artifificially high. But if prices are not artificially high, adding competition will not lower them. It may or may not be the case that rail rates are artificially too high. In cases where that is not so, even with a captive shipper, adding reciprocal switching will not cause the alternative shipper to under-bid the railroad directly serving the shipper.
But let me ask you this: Suppose you are a captive shipper who believes the railroad serving you is over-pricing the service. So you get reciprocal switching which provides you with an alternate carrier. Then the alternate carrier quotes a slightly higher price than the carrier that directly serves your business. How would you react?
Euclid schlimm Free market economics says that competition assures greater efficiencies and pricing based on non-skewed cost-demand curves. Do you dispute that? Competitive switching simply attempts to provide alternatives for captive customers. No, I don't dispute any of that. My point is that the captive shippers who advocate reciprocal switching will expect lower rate from the alternative carrier. Yet economic theory does not guarantee that. So the expectation is flawed. It is based on the shipper sense of victimization in that the carrier will always cheat. Therefore the shipper is not prepared for the fact that there may be fairness without reciprocal switching. So if reciprocal switching fails to lower a rate, the shipper will blame the carrier and seek a remedy. The only possible remedy for such a shipper is a regulation on the rate.
schlimm Free market economics says that competition assures greater efficiencies and pricing based on non-skewed cost-demand curves. Do you dispute that? Competitive switching simply attempts to provide alternatives for captive customers.
No, I don't dispute any of that. My point is that the captive shippers who advocate reciprocal switching will expect lower rate from the alternative carrier. Yet economic theory does not guarantee that. So the expectation is flawed. It is based on the shipper sense of victimization in that the carrier will always cheat.
Therefore the shipper is not prepared for the fact that there may be fairness without reciprocal switching. So if reciprocal switching fails to lower a rate, the shipper will blame the carrier and seek a remedy. The only possible remedy for such a shipper is a regulation on the rate.
I suggest you examine market economics. The point of competition (not monopolies) is the lowest prices consistent with customer demand and supplier production/offers. If there is only one railroad, or utility, that is a monopoly, period, by any definition. And the price curve is thus distorted.
When Staggers was passed, there was far more competition among more rail lines than now, 36 years later. Link to study
schlimmFree market economics says that competition assures greater efficiencies and pricing based on non-skewed cost-demand curves. Do you dispute that? Competitive switching simply attempts to provide alternatives for captive customers.
Free market economics says that competition assures greater efficiencies and pricing based on non-skewed cost-demand curves. Do you dispute that? Competitive switching simply attempts to provide alternatives for captive customers.
I think that reciprocal switching is based on a flawed premise.
Some rail customers who are captive to one railroad believe that they are being overcharged on shipping rates, and that this is due to a lack of competition. So they ask the government to mandate reciprocal switching which gives many captive rail customers a second choice of railroads to ship on. This will provide the needed competition.
The presence of the alternate railroad acts as a watchdog to assure that the railroad directly serving a customer does not overcharge the customer. This is because if the direct railroad overcharges a customer, the alternate railroad will underbid the direct railroad with a fairer rate because they are a competitor and they want the business. All of that is fine economic theory.
The problem is that this theory goes beyond just recognizing that fact a railroad has no competition for a captive shipper. It goes beyond that by embracing the unprovable belief that captive customers are being overcharged based only on the evidence that competition is lacking. That is the premise that mandated reciprocal switching is based on. But it is a flawed premise.
While competition assures fairness, it does not necessarily follow that a lack of competition assures unfairness. It may very well be the case that there is a perfectly fair rate even without any competition. But the premise of reciprocal switching does not accept that as a possibility. So what will be the conclusion when a captive shipper turns to an alternate carrier under reciprocal switching and does not receive a lower rate? The only conclusion can be that both carriers are agreeing to keep the price unfairly high. That is the result of the reciprocal switching premise being flawed. What will be the remedy?
schlimm Euclid What I described above would be two railroads working in a competitive way without any monopoly. And their competing relationship already has the rate as low as either one wants it, so the competition is 100% effective in forcing the lowest possible rate. The shipper has choices, but neither choice offers a rate lower than the other. What is wrong with that? Without access through reciprocal/competive switching, the customer has no choice of rails. It's a captive market.
Euclid What I described above would be two railroads working in a competitive way without any monopoly. And their competing relationship already has the rate as low as either one wants it, so the competition is 100% effective in forcing the lowest possible rate. The shipper has choices, but neither choice offers a rate lower than the other. What is wrong with that?
What I described above would be two railroads working in a competitive way without any monopoly. And their competing relationship already has the rate as low as either one wants it, so the competition is 100% effective in forcing the lowest possible rate. The shipper has choices, but neither choice offers a rate lower than the other. What is wrong with that?
Without access through reciprocal/competive switching, the customer has no choice of rails. It's a captive market.
The scenario that I described above includes reciprocal switching having been established. The customer does have a choice. There is no captive market. But the alternative railroad will not underprice the originating railroad.
daveklepper ֹֹֹֹEUCLID, THERE ARE ALWAYS TRURCKS!!!!
ֹֹֹֹEUCLID, THERE ARE ALWAYS TRURCKS!!!!
This is all a tempest in a teapot. The NITL members are industries that have monopolies in their own fields of operation and sales. In the ICC era, they had the power to dictate rates and traffic to the carriers and took great delight in 'playing one against another' to the detriment of both carriers. Since Staggers and deregulation they have had to deal with the carriers that service them as business equals - and they feel agrieved at having to deal with their former 'underlings' as business equals. It is all as simple and complex as that.
I believe, when one does the math in constant dollars one will find that the NITL members are paying less for their transportation today than they were in the period they would like to recreate. Everybody wants 'free shipping'.
Never too old to have a happy childhood!
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