carriers ready to be taken advantage of by underestimated ser-
vice requirements. Poor information flows would also be indi-
cated if carrier type and the method of arranging loads affect-
ed rate levels. Such indications of information problems would
cast doubts on the advisability of deregulation in other trans-
portation markets. Indeed, the contention that information
costs are high in the absence of rate and entry regulation has
been a major argument of those opposing economic deregulation.
However, as information appears to be readily available to all
participants, it is strongly anticipated that these indications
of information problems will not materialize in the analysis.




3. Influence of cargo value and shipping urgency on rates

 A rate structure which is positively correlated with the
value of the cargo is known as value-of-service pricing, Eco-
nomists have traditionally explained the existence of value-of-
service pricing in terms of price discrimination.


 To the economist, value-of-service pricing means
 price discrimination. A firm with monopoly power
 and the ability to separate demand for its product
 into separate markets can increase its profits by
 charging higher rates to its customers with less
 elastic demands. (Olson, p. 395)


 Blame for the existence of such rate structures has almost
universally been placed at the feet of state and federal regu-
latory systems. Indeed these regulatory agencies traditionally
have included cargo value as an allowable criterion for pricing
and have promoted centers of legalized price collusion (rate
bureaus)1 which facilitate pricing discipline in the industry.

 Typically, regulators have defended this practice on the
grounds that it is necessary to ensure carrier viability or to
further social goals (such as subsidizing raw materials
freight). However, value-of-service pricing and the regulators