Recovering Capital Expenditures: The Railroad Industry Paradox
Grimes, George Avery
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https://hdl.handle.net/2142/83251
Description
Title
Recovering Capital Expenditures: The Railroad Industry Paradox
Author(s)
Grimes, George Avery
Issue Date
2004
Doctoral Committee Chair(s)
Christopher P.L.Barkan
Department of Study
Civil Engineering
Discipline
Civil Engineering
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Commerce-Business
Language
eng
Abstract
This research combines engineering, economic, and financial methods and makes contributions in each area. Railroad maintenance strategies that rely more heavily on capital investment are more cost effective. Infrastructure capital spending is caused by current and future output, and is therefore a short run marginal cost. Railroad marginal cost formulae appear to substantially underestimate the true incremental nature of ongoing capital expenditures. Regulatory average variable cost formulae do not incorporate variable capital expenditures suggesting that Surface Transportation Board estimates of revenue to variable cost are overstated, subjecting a larger share of rail traffic to potential economic regulation than would otherwise occur.
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