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Chapter 6: The Role of Transportation in Economic Geography Transport Eras Transport Rates World Transportation Patterns Summary
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Transport Eras - Taaffe’s Schema Local era: pre-railroad and prior to opening of the Erie Canal in 1825 Trans-Appalachian era: canals and railroads up to ca. 1860 (Figure 6.1) Era of railroad dominance (ca. 1860 to World War II) Rise of gateway cities Competitive era: multi-modal
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Composition of Intercity Freight Traffic
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Freight Outlays (Shares of total)
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Revenue Per Ton-Mile
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Fixed & Variable (Operating) Costs
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The Structure of Transport Costs Terminal Costs versus Line Haul Costs - buildings, docks, handling Distance Transport Cost / Mile Terminal Cost $5 Line Haul Cost $.25/ton-mile $5.25 1100 $.30 Total Transport Cost/Unit Weight Distance Linear O T Tapering
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Variations in Transport Costs Among Modes Distance Transport Cost/Unit Weight Truck Rail Ship Pipeline Air TRS
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Factors Influencing Transport Rates 1. Grouping freight rates into zones (fig 3.14) 2. Variations due to commodity characteristics (a) Differences in cost of service related to: (1) Loading characteristics (2) Size of shipment (3) Perishability and risk of damage (b) Elasticity of Demand for Transportation (Box3-1) 3. Variations due to traffic characteristics (a) intermodal competition (b) traffic density (c) direction of haul
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Freight Rate Zones
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Demand Elasticity $ Q Elastic $ Q Perfectly Inelastic Q $ Perfectly Elastic
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General Relationship Between Distance and Unit Cost Distance Quantity $
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Tapered Freight Rates Can Alter Market Areas ABM M* M**
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Freight Rates Can Create Overlapping Market Boundaries: Demand Cones from Places A & B Place A Place BST
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Transport Costs for Inputs and Products M S Combined tr. Cost on Product and Factor Cost of moving Factor Cost of moving product Scenario assumes all other costs are spatially invariant
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Transport Costs for Inputs and Products With Terminal Costs M S Combined tr. Cost on Product and Factor plus terminal costs Cost of moving Factor Cost of moving product Scenario assumes all other costs are spatially invariant
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Effects on the Location of Production General Tendency to Pull Away from Intermediate Locations MarketMaterial S T X Y G H Impact on spacing of isotims – concept coming
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Tapered Transport Costs Pull Mfg. towards markets or materials--But: 1. Intermodal “break of bulk” locations 2. In-transit privileges - lower rate for long haul granted to raw and processed materials MaterialMarket Transshipment Location Material Tr. Cost Product Tr. Cost
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Isotims and Isodapanes
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Smith’s Space-Cost Model
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Spatial Pricing Policies A. FOB - Free On Board - Consumer pays full cost of transport B. Discriminatory (1) Uniform delivered pricing (CIF) (2) Basing point (3) Spatially discriminatory pricing (market segmentation) (4) dumping
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Typical F.O.B. Market XYBB* T A R S
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Basing Point Pricing P Basing Point R S T X A B C Phantom Freight M Distance O
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General Pricing Principle Producers choose location to maximize profit Profit = Total Revenue – Total Costs Total Revenue = sum of revenues from various geographic markets Total Costs = sum of costs for all input factors and transportation costs
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Hypothetical Example Total, Average & Marginal Cost Relations
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Graph of Hypothetical Example PoPo QoQo
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Market Segmentation & Dumping $ Q AC MC AR MR AR A P Q* MR A QAQA PAPA AR B MR B QBQB PBPB
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