Economies of Traffic Density in the Rail Freight Industry

The extent of economies of traffic density in the rail freight industry is a matter of critical importance with respect to public investment in and the financial viability of the United States rail system. Certain inadequacies of previous studies of rail costs are reviewed and methodological modifications proposed. The results of an econometric analysis which incorporates these revisions are presented. The evidence strongly supports the hypothesis that significant economies of density exist, and that many of the light-density lines which comprise 40 percent of the rail system should be eliminated.