Q2 Z2,(Q2) Z2(Q2) - Institute for Water Resources - U.S. Army

CHAPTER III
THE TWO-MARKET MULTI-MODE TRANSPORTATION MODEL
In this chapter we develop our two-market multi-mode transportation
model. The concepts'utiiized in the model are introduced first. The
next section contains i discussion of the quality-associated costs of
transportation and our method of integrating these costs into the model.
Finally, we present the full model in algebraic form and investigate
the effectsof structural changes. The appendices following the chapter
are concerned with - the elasticities of transport demand and the examina-
tion of a monopolistic model. In Appendix A we derive the elasticity
of the total demand •for transportation whereas Appendix B presents the
elasticity of a modal demand. Appendix C then examines the behavior of
a monopolistic transport mode facing this modal demand curve.
Geometrical Development of the Concepts
We shall begin by introducing the concepts utilized in our trans-
portation model. The starting point is the derivation of the demand for
the transportation of some commodity between two markets. A supply of
transportation function is introduced to close the system and determine
the equilibrium quantities and prices. The model is then expanded to
include shipper incurred transportation costs other than the direct
intermarket transport rate and several modes of transport. Finally,
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