WHERE STEEL MEETS THE TRACK: EXAMINING THE FUNCTIONALITY OF REGULATORY POLICY IN THE CANADIAN GRAIN TRANSPORTATION SYSTEM
Date
2022-05-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
ORCID
0000-0002-0547-9642
Type
Thesis
Degree Level
Masters
Abstract
The last century has been an era of incredible advancements in grain production for Canada’s agricultural sector. A large portion of the country’s annual grain production is exported around the globe to a wide variety of international destinations. However, many of these exports originate from Western Canada – a fertile but land-locked portion of the country. This has left the grain handling and transportation system (GHTS) in Western Canada heavily reliant on rail transportation as a means of efficiently and cost-effectively moving product to tide water. With rapid modernization continuing to occur in both the production and grain handling sectors of the industry, it is important that the government policies regulating the transportation of Canadian grain by rail continue to best serve all the players involved in the face of a changing industry landscape.
The thesis explores three main policy measures currently used by the Canadian Transportation Agency (CTA) to regulate movements of grain by rail in Western Canada. These include the Maximum Revenue Entitlement (MRE), interswitching provisions, and Final Offer Arbitration (FOA). Discussion of these measures is augmented by the presentation of a game theory model to investigate current topics of debate related to interswitching regulations. The model is used to support an argument grounded in contestable market theory that using interswitching activity as a means of measuring the usefulness of interswitching provisions might be a poor metric. The model demonstrates that when a shipper’s ability to call for an interswitch order is viewed by a railway as a viable threat, competitive outcomes can be achieved without an interswitch movement occurring.
Furthermore, the thesis also examines data obtained through experiments conducted with the Canadian Hub for Applied and Social Research (CHASR) to investigate aspects of the current FOA framework that could be optimized. A two-player game was designed and conducted with the help of 50 participants to investigate the effects of information asymmetry and variance in the length of FOA arbitrator rulings. Our findings underline the importance of minimizing information asymmetry amongst shippers and railways participating in the FOA process to ensure that the policy achieves its intended outcomes. Furthermore, trends in the data suggest that lengthening the period of time that an arbitrator’s ruling is enforced may encourage even less extreme offers from the parties participating in the FOA process.
The thesis is intended as a means of better understanding the strengths and deficiencies of the current regulatory measures in place so that the industry is prepared for continued growth and advancement in the century ahead.
Description
Keywords
Rail policy, Canadian rail policy, Maximum Revenue Entitlement, Interswitching, Final Offer Arbitration
Citation
Degree
Master of Science (M.Sc.)
Department
Agricultural and Resource Economics
Program
Agricultural Economics