A Matching Model for the Backhaul Problem

Tinbergen Institute Discussion Paper No. TI 07-083/3

40 Pages Posted: 8 Nov 2007

See all articles by Erhan Demirel

Erhan Demirel

VU University Amsterdam - Department of Spatial Economics

Jos van Ommeren

Tinbergen Institute; Vrije Universiteit Brussel (VUB)

Piet Rietveld

VU University Amsterdam - Department of Spatial Economics (Deceased)

Date Written: October 2007

Abstract

The 'backhaul problem' is characterized by an imbalance in transport flows between locations. This problem is usually studied in a perfectly competitive framework, which essentially predicts that when the imbalance is sufficiently large, the freight price of transport from low demand regions to high demand regions, the so-called backhaul price, drops to zero. This result is inconsistent with empirical observations. In this paper, we develop a matching model to address this inconsistency. We argue that market friction, through search imperfections due to lack of information by carriers on the (future) demand for transport by customers, may play an important role in the determination of backhaul prices. We demonstrate that carriers are at least compensated for the time they search for customers, so the backhaul price is in general positive. The matching model is numerically applied to the inland navigation shipping market in the Rhine river area in Western-Europe. We also analyse the effects of increases in transport costs on transport flows and backhaul prices, e.g. due to climate changes.

Keywords: Backhaul Problem, Imperfect Information, Matching Models

JEL Classification: R40, R41

Suggested Citation

Demirel, Erhan and van Ommeren, Jos and van Ommeren, Jos and Rietveld, Piet, A Matching Model for the Backhaul Problem (October 2007). Tinbergen Institute Discussion Paper No. TI 07-083/3, Available at SSRN: https://ssrn.com/abstract=1027628 or http://dx.doi.org/10.2139/ssrn.1027628

Erhan Demirel (Contact Author)

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Jos Van Ommeren

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Piet Rietveld

VU University Amsterdam - Department of Spatial Economics (Deceased)

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446097 (Phone)
+31 20 4446004 (Fax)

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