Market power in transportation: Spatial equilibrium under Bertrand competition

We examine spatial competition along a waterway when shippers are distributed over space. Competition is between barge and rail companies and among barge companies. Equilibrium prices are derived for two variations: oligopolistic rivalry between barge and rail operators, and oligopolistic rivalry among barge operators with terminals located at different points on the waterway. In the first variant, each mode has an advantage over some shippers and transporters׳ overprice cost advantages (price differences are too small in equilibrium). The second variant delivers a “chain-linked” system of markets, whereby cost changes in one market are passed through equilibrium prices to other markets. Barge operators with cost advantages parlay these into market size advantages.