SHORT-RUN FREIGHT-DEMAND MODEL: JOINT CHOICE OF MODE AND SHIPMENT SIZE (ABRIDGMENT)

An important part of any quantitative analysis of freight transportation is a capability for forecasting the demand for a certain type of service under a given set of conditions. Unfortunately, the state of the art in freight-demand modeling is still rather primitive. It is clear that the firm is the basic decision-making unit in the transportation of freight. However, the role of the firm in selecting freight transportation service has not been explored satisfactorily. Most of the existing freight-demand models are correlative rather than explanatory and insensitive to changes in transport level-of-service measures. Researchers in the past have been constrained either to piecing together useful aggregate data to estimate an aggregate demand model or to using shipper surveys to estimate a very limited shipper-choice model. An attempt to develop a freight-demand model that involves the choice of mode as well as shipment size without imposing the assumption of constant transportation rate is given. A multinomial logit model of mode and shipment size is developed at the level of the individual firm. The utility function is derived from logistics inventory theory that considers explicitly the trade-offs the firm can make in response to a short-run change in transportation level of service. The major assumption is that the substitution between transportation and other factors of production, such as labor and capital, is relatively inelastic when compared with the substitutions that can take place within the transportation sector itself. (Author)