transportation demand and volume sensitivity: a study of grain shippers in the upper mississippi...

Transportation Demand and Volume Sensitivity:Transportation Demand and Volume Sensitivity:

A Study of Grain Shippers A Study of Grain Shippers in the in the

Upper Mississippi River ValleyUpper Mississippi River Valley

byby

Kenneth Train Kenneth Train University of California – BerkeleyUniversity of California – Berkeley

andand

Wesley W. WilsonWesley W. WilsonUniversity of OregonUniversity of Oregon

andandInstitute for Water ResourcesInstitute for Water Resources

Transportation Research Board Transportation Research Board January 14, 2008January 14, 2008

Navigation and Economics Navigation and Economics Technology ProgramTechnology Program

A group of academic and non-academic economists, planners, etc. working with the Army Corps of A group of academic and non-academic economists, planners, etc. working with the Army Corps of Engineers to develop the economics underlying benefit measurement of investments in the Engineers to develop the economics underlying benefit measurement of investments in the waterways. Program is directed by Keith Hofseth of the Institute for Water Resources. Studies waterways. Program is directed by Keith Hofseth of the Institute for Water Resources. Studies involve both base line studies as well as planning tools. Topics include:involve both base line studies as well as planning tools. Topics include:

Choice modelingChoice modeling Spatial EquilibriumSpatial Equilibrium Spatial EconometricsSpatial Econometrics Congestion modelingCongestion modeling Port EfficiencyPort Efficiency Port ChoicePort Choice Forecasting transportation traffic.Forecasting transportation traffic.

All research on All research on

www.corpsnets.uswww.corpsnets.us and there is a link to a monthly newsletter called and there is a link to a monthly newsletter called

Nets News please sign up.Nets News please sign up.

This is one paper in a series that examines the responsiveness of transportation demands to key This is one paper in a series that examines the responsiveness of transportation demands to key determinants.determinants.

http://www.corpsnets.us/

BackgroundBackground

Transportation demand decisions commonly Transportation demand decisions commonly involve decisions with regard to:involve decisions with regard to:– ModeMode– Destination/Origin Destination/Origin – Volumes ShippedVolumes Shipped

BackgroundBackground

Analysis focuses on the annual shipment Analysis focuses on the annual shipment volumes of shippers and how these volumes volumes of shippers and how these volumes adjust in response to changes inadjust in response to changes in– RatesRates– Transit timesTransit times– ReliabilityReliability

But, shipper attributes may also matter But, shipper attributes may also matter e.g., modal access, capacity, distances to e.g., modal access, capacity, distances to alternative modesalternative modes

Survey Survey

Implemented by Washington State University Social Implemented by Washington State University Social and Economic Sciences Research Center.and Economic Sciences Research Center.

States: Iowa, Illinois, Indiana, Wisconsin, Kansas, States: Iowa, Illinois, Indiana, Wisconsin, Kansas, Missouri, Nebraska, North Dakota, South Dakota, Ohio, Missouri, Nebraska, North Dakota, South Dakota, Ohio, and Minnesota and Minnesota

List of shippers from Dunn & Bradstreet, FarmNet List of shippers from Dunn & Bradstreet, FarmNet Services, and NDSU list of warehouses/grain elevatorsServices, and NDSU list of warehouses/grain elevators

Stratified sampling: > or < 100 miles to riverStratified sampling: > or < 100 miles to river August – October 2006.August – October 2006. 480 responses, with 27.5% response rate.480 responses, with 27.5% response rate.

Shipper LocationsShipper Locations

Destination locationsDestination locations

Mode AccessMode Access

ModeMode YesYes NoNo

Mean Distance to Mean Distance to Mode if No Direct Mode if No Direct

AccessAccess(miles)(miles)

Median Median Distance to Mode if No Distance to Mode if No

Direct AccessDirect Access(miles)(miles) NN

TruckTruck 479479 11 N.A.N.A. N.AN.A

Rail Rail 201201 270270 2525 2020 248248

BargeBarge 2323 435435 137137 9090 390390

Longevity at locationLongevity at location

YearsYears FrequencyFrequency %% Cumulative %Cumulative %

1010 1717 3.743.74 3.743.74

2020 3333 7.257.25 10.9910.99

3030 5959 12.9712.97 23.9623.96

4040 6161 13.4113.41 37.3637.36

5050 6666 14.5114.51 51.8751.87

6060 3939 8.578.57 60.4460.44

7070 2727 5.935.93 66.3766.37

8080 3030 6.596.59 72.9772.97

9090 4545 9.899.89 82.8682.86

100100 5656 12.3112.31 95.1695.16

110110 1515 3.33.3 98.4698.46

120120 22 0.440.44 98.998.9

130130 33 0.660.66 99.5699.56

140140 11 0.220.22 99.7899.78

150150 11 0.220.22 100100

TotalTotal 455455 100100

Response of annual volumes Response of annual volumes to changes in to changes in

average rates, times, and reliabilityaverage rates, times, and reliability

Shippers were asked if the average rates they Shippers were asked if the average rates they faced rose by X%, would they reduce their faced rose by X%, would they reduce their annual volume shipped, and if so by how annual volume shipped, and if so by how much.much.

Asked for: rate to shipper alone, rate to all Asked for: rate to shipper alone, rate to all shippers, transit time, and reliabilityshippers, transit time, and reliability

Response to rate increasesResponse to rate increasesto all shippersto all shippers

% Rate% RateChangeChange ChangeChange

No No ChangChang

ee

% Change % Change given a given a

Change OccursChange Occurs

Implied Implied Elasticity Elasticity given agiven a


1010 88 4848 15.815.8 1.581.58

2020 2323 5656 23.323.3 1.171.17

3030 1717 4848 32.832.8 1.091.09

4040 3737 3838 30.630.6 0.770.77

5050 3838 4444 3838 0.760.76

6060 3939 3333 42.642.6 0.710.71

TotalTotal 162162 267267 41.841.8 0.880.88

Response to rate increases Response to rate increases to shipper aloneto shipper alone

% Rate % Rate ChangeChange ChangeChange

No No Change Change

% Change given % Change given aa


Implied Elasticity Implied Elasticity given a given a


1010 2929 4949 31.2531.25 3.133.13

2020 4242 2828 35.4635.46 1.771.77

3030 4141 3939 35.1835.18 1.171.17

4040 4949 2626 52.0852.08 1.301.30

5050 5656 1515 55.0255.02 1.101.10

6060 3434 1212 61.8561.85 1.031.03

TotalTotal 251251 169169 46.4446.44 1.481.48

Response to time increases Response to time increases

% Time % Time ChangeChange ChangeChange

No No Change Change

% Change% ChangeGiven a Given a Change Change OccursOccurs

Implied Elasticity Implied Elasticity given a given a


1010 1414 6666 15.2515.25 1.531.53

2020 1515 6161 19.1419.14 0.960.96

3030 2121 3535 31.0631.06 1.041.04

4040 2828 4040 29.9129.91 0.750.75

5050 2727 3232 37.2537.25 0.750.75

6060 3939 4141 39.7339.73 0.660.66

TotalTotal 144144 275275 31.5731.57 0.860.86

Response to reliability decreases Response to reliability decreases

% Reliability % Reliability Change Change ChangeChange No ChangeNo Change

% Change % Change given a given a Change Change OccursOccurs

Implied Implied Elasticity Elasticity given a given a Change Change OccursOccurs

1010 1212 5757 16.2516.25 1.631.63

2020 2121 4646 21.9221.92 1.101.10

3030 2626 4444 27.1327.13 0.900.90

4040 2626 3737 29.2529.25 0.730.73

5050 2929 4545 33.4633.46 0.670.67

6060 2828 3535 32.5732.57 0.540.54

TotalTotal 142142 264264 28.1928.19 0.840.84

Stated preference questions related to Stated preference questions related to annual shipment volumes:annual shipment volumes:

If rates increased by XX percent, would your If rates increased by XX percent, would your annual shipment volumes decrease? annual shipment volumes decrease?

If yes, by what percent? If yes, by what percent?

Possible responses: Possible responses: – No No – Yes and the percentage of decrease.Yes and the percentage of decrease.

Model componentsModel components

As a matter of theory, we can illustrate that the sp As a matter of theory, we can illustrate that the sp questions can be modeled from a wide range of alternative questions can be modeled from a wide range of alternative models. Empirically, we have two parts:models. Empirically, we have two parts:

– Probit model of whether shipper reduces its annual volume Probit model of whether shipper reduces its annual volume – Regression of amount of reduction, given a reduction occurs Regression of amount of reduction, given a reduction occurs

corrected for the probability that a reduction may not occur.corrected for the probability that a reduction may not occur.

Model for volume response to rate Model for volume response to rate changes to all shipperschanges to all shippers

(1)(1) (2)(2) (3)(3)

VariableVariable LevelLevel SelectionSelection LevelLevel SelectionSelection LevelLevel SelectionSelection

Log (1+rate Log (1+rate change)change) -1.380-1.380 -0.864-0.864 -0.901-0.901

(5.41)***(5.41)*** (2.71)***(2.71)*** (2.82)***(2.82)***

Log (rate change)Log (rate change) 0.5020.502 0.6160.616 0.7060.706

(4.93)***(4.93)*** (4.89)***(4.89)*** (5.31)***(5.31)***

Access Barge Access Barge 0.3050.305 0.0670.067

(0.54)(0.54) (0.12)(0.12)

Access Rail Access Rail 0.1620.162 0.0770.077

(1.14)(1.14) (0.25)(0.25)

Access Barge and Access Barge and RailRail 1.2451.245 0.9020.902

(3.10)***(3.10)*** (1.70)*(1.70)*

continuedcontinued

Log(Storage Capacity)Log(Storage Capacity) -0.149-0.149

(2.15)**(2.15)**

Log(Rail Car Loading Log(Rail Car Loading cap)cap) 0.2110.211

(2.50)**(2.50)**

Log(Distance to Rail)Log(Distance to Rail) 0.1690.169

(2.11)**(2.11)**

Number of OptionsNumber of Options 0.0640.064

(2.09)**(2.09)**

ConstantConstant 0.5790.579 0.1310.131 -0.202-0.202 0.1730.173 -0.306-0.306 1.2901.290

(6.16)***(6.16)*** (0.99)(0.99) (1.12)(1.12) (1.05)(1.05) (1.66)*(1.66)* (1.80)*(1.80)*

ObservationsObservations 404404 404404 404404 404404 370370 370370

Elasticities wrt Rate Change for all Elasticities wrt Rate Change for all shippersshippers

PercentagePercentageChange inChange in

RatesRatesConditionalConditional

ElasticityElasticityUnconditionalUnconditional

ElasticityElasticity

ProbabilityProbabilityof aof a

Volume ChangeVolume Change

1010 -1.407-1.407 -0.075-0.075 0.0500.050

2020 -1.116-1.116 -0.153-0.153 0.1230.123

3030 -0.954-0.954 -0.208-0.208 0.1910.191

4040 -0.845-0.845 -0.246-0.246 0.2510.251

5050 -0.764-0.764 -0.272-0.272 0.3040.304

6060 -0.700-0.700 -0.289-0.289 0.3500.350

Model for volume response to rate Model for volume response to rate changes to shipper alonechanges to shipper alone

(1)(1) (3)(3) (5)(5)


Log (1+rate Log (1+rate change)change) -1.995-1.995 -2.275-2.275

--1.7601.760

(5.21)***(5.21)***(6.31)**(6.31)**

**(3.70)(3.70)

******

Log (rate change)Log (rate change) 0.4930.493 0.5300.530 0.5730.573

(4.91)***(4.91)*** (5.55)***(5.55)*** (4.47)***(4.47)***

Access Barge Access Barge -0.031-0.031 1.0261.026

(0.15)(0.15) (1.52)(1.52)

Access Rail Access Rail 0.0970.097 -0.134-0.134

(1.50)(1.50) (0.45)(0.45)

Access Barge and Access Barge and RailRail 0.2050.205 0.2070.207

(1.38)(1.38) (0.35)(0.35)

continuedcontinuedLog(Storage Log(Storage Capacity)Capacity) -0.141-0.141

(1.99)**(1.99)**

Log(Rail Car Log(Rail Car Loading Loading Capacity)Capacity) 0.1910.191

(2.36)**(2.36)**

Log(Distance Log(Distance to Rail)to Rail) -0.009-0.009

(0.12)(0.12)

Number of Number of OptionsOptions -0.037-0.037

(0.92)(0.92)

ConstantConstant 0.4930.493 0.6040.604 0.5640.564 0.6070.607 -0.027-0.027 1.9621.962

(4.03)***(4.03)*** (4.04)***(4.04)*** (4.77)***(4.77)*** (4.27)***(4.27)*** (0.09)(0.09) (2.62)***(2.62)***


Elasticities wrt Rate Change for Elasticities wrt Rate Change for shipper aloneshipper alone

Percentage Percentage Change in Change in


ElasticityElasticityUnconditional Unconditional




1010 -2.709-2.709 -0.657-0.657 0.2150.215

2020 -1.840-1.840 -0.737-0.737 0.3470.347

3030 -1.493-1.493 -0.761-0.761 0.4360.436

4040 -1.284-1.284 -0.759-0.759 0.5020.502

5050 -1.136-1.136 -0.742-0.742 0.5530.553

6060 -1.023-1.023 -0.719-0.719 0.5940.594

Model for volume response to time Model for volume response to time changeschanges

(1)(1) (3)(3) (5)(5)


Log(1+time change)Log(1+time change) -0.955-0.955 -0.937-0.937--

1.0821.082

(2.41)**(2.41)** (2.54)**(2.54)**(2.31)(2.31)

****

Log(time change)Log(time change) 0.4830.483 0.4940.494 0.4790.479

(4.20)***(4.20)*** (4.27)***(4.27)*** (3.96)***(3.96)***

Access Barge Access Barge -0.558-0.558 -0.480-0.480

(0.88)(0.88) (0.75)(0.75)


(0.06)(0.06) (1.28)(1.28)

Access Barge and Access Barge and RailRail -0.443-0.443 -1.103-1.103

(0.96)(0.96) (1.74)*(1.74)*

continuedcontinuedLog(Storage Log(Storage Capacity)Capacity) 0.0490.049

(0.71)(0.71)

Log(Rail Car Log(Rail Car Loading Loading Capacity)Capacity) 0.0850.085

(1.06)(1.06)

Log(Distance Log(Distance to Rail)to Rail) -0.034-0.034

(0.45)(0.45)

Number of Number of OptionsOptions 0.0160.016

(0.56)(0.56)

ConstantConstant -0.161-0.161 0.0070.007 -0.180-0.180 0.0360.036 0.0380.038 -0.376-0.376

(0.50)(0.50) (0.05)(0.05) (0.63)(0.63) (0.21)(0.21) (0.09)(0.09) (0.53)(0.53)


Elasticities wrt Time ChangeElasticities wrt Time Change







1010 -1.841-1.841 -0.310-0.310 0.1550.155

2020 -1.179-1.179 -0.321-0.321 0.2470.247

3030 -0.960-0.960 -0.335-0.335 0.3120.312

4040 -0.839-0.839 -0.344-0.344 0.3620.362

5050 -0.756-0.756 -0.348-0.348 0.4030.403

6060 -0.694-0.694 -0.349-0.349 0.4370.437

Model for volume response to reliability Model for volume response to reliability changeschanges

(1)(1) (3)(3) (5)(5)

VariableVariable LevelLevel Select Select LevelLevel SelectSelect LevelLevel

SelectSelect

Log(1+rel. Log(1+rel. change)change) -0.526-0.526 -0.719-0.719 -0.644-0.644

(2.26)**(2.26)** (3.58)***(3.58)*** (3.00)***(3.00)***

Log (rel. change)Log (rel. change) 0.3910.391 0.2850.285 0.2150.215

(3.35)***(3.35)*** (2.68)***(2.68)*** (1.91)*(1.91)*

Access Barge Access Barge -0.119-0.119 -0.038-0.038

(0.54)(0.54) (0.17)(0.17)


(2.01)**(2.01)** (1.18)(1.18)

Access Barge and Access Barge and RailRail -0.000-0.000 -0.435-0.435

(0.00)(0.00) (1.71)*(1.71)*

continuedcontinued

Log(Storage Log(Storage Capacity)Capacity) 0.0300.030

(0.75)(0.75)

Log(Rail Car Log(Rail Car Loading Capacity)Loading Capacity) 0.0540.054

(1.53)(1.53)

Log(Dist. to Rail)Log(Dist. to Rail) -0.048-0.048

(1.07)(1.07)

Number of OptionsNumber of Options -0.229-0.229 -0.063-0.063 0.3100.310 -0.234-0.234 0.2920.292 -0.493-0.493

(1.14)(1.14) (0.42)(0.42) (4.28)***(4.28)*** (1.59)(1.59) (3.52)***(3.52)*** (1.15)(1.15)

ConstantConstant -0.004-0.004

(0.32)(0.32)


Elasticities wrt Reliability ChangeElasticities wrt Reliability Change







1010 2.4172.417 0.6190.619 0.2310.231

2020 1.2591.259 0.3880.388 0.2790.279

3030 0.9060.906 0.3110.311 0.3090.309

4040 0.7350.735 0.2720.272 0.3310.331

5050 0.6320.632 0.2480.248 0.3480.348

6060 0.5610.561 0.2310.231 0.3630.363

ConclusionsConclusions Shippers do respond to rates, transit time, and Shippers do respond to rates, transit time, and

reliability.reliability.

Shippers respond by adjusting their annual volumes.Shippers respond by adjusting their annual volumes.

A large share of shippers have no feasible A large share of shippers have no feasible alternatives to their chosen mode/destination.alternatives to their chosen mode/destination.

Elasticities wrt rates, times, and reliability are Elasticities wrt rates, times, and reliability are generally small.generally small.

Conclusions, cont’d Conclusions, cont’d

Shippers adjust their annual volumes more in Shippers adjust their annual volumes more in response to a rate change to the shipper response to a rate change to the shipper alone than to a rate change to all shippers.alone than to a rate change to all shippers.

transportation demand and volume sensitivity: a study of grain shippers in the upper mississippi...

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