Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

Abstract: This paper documents price discrimination by transport companies, revealing their market power. Larger shipments of similar products sharing a container receive lower prices. A trade model with non-linear pricing of transportation rationalizes this with economies of scale and price discrimination, highlighting their distinct policy implications. To distinguish them, I test for the effect of competition on freight price variation specific to price discrimination. Using unexpected water level changes to instrument for competition in river transportation, I find increased competition causes steeper discounts for larger shipments. Thus, market power in transportation is less distortionary for larger firms gaining additional cost advantages.

Keywords: price discrimination; quantity discounts; transportation; competition; economies of scale; mark-ups; market power

JEL-codes: D22; D43; F10; F12; F14

Language: English

59 pages, April 26, 2024

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