Measuring the Multilateral Allocation of Rents: Wyoming Low-Sulfur Coal

This article develops a general econometric procedure for determining the amount of rent captured by buyers and sellers of goods produced under any market structure. We use this technique to measure the rents earned by firms involved in the extraction, transportation, and consumption of low-sulfur Wyoming coal. Statistical results indicate that railroads and coal producers each capture about 23% of potential rent, while the state and purchasing utilities capture 7% and 47%, respectively. Further, statistical tests support the hypothesis that rents have shifted towards the railroads since their deregulation in 1980. We also examine the extent of discriminatory pricing by relating the percentage markups of price over estimated marginal cost to the demand elasticity for coal. We find evidence of price discrimination by coal producers and railroads, but the degree of price discrimination exercised by coal producers declines with more recent contracts.