USING SPATIAL EQUILIBRIUM MODELS TO ANALYZE TRANSPORTATION RATES: AN APPLICATION TO STEAM COAL IN THE UNITED STATES

This paper uses the implications of Samuelson's spatial equilibrium model to analyze transportation rates for steam coal delivered to electric utilities in the United States. The analysis indicates that transportation rates declined in every year but two since railroads were substantially deregulated in 1980. While some utilities may have experienced some rate increases, coal-fired electric utilities as a whole have clearly benefited from lower transportation rates, and economic welfare has increased. The methodology in this study may be used in other instances where reliable data on transportation rates are not available, but data on delivered prices are available.

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