Estimating the In8uence of Service Quality on Transportation Demand

Following a theoretical justification for considering service quality as a demand determinant based upon conventional derived demand analysis, an empirical procedure is developed for estimating the response of demand and modal selection probability to changes in service quality. The estimation technique suggested is similar to that used in the measurement of hedonic price indices, permitting a subjective evaluation of quality factors by shipping managers. An empirical demonstration suggests that transport demand responsiveness to transport service quality is inelastic for country grain elevators. Key words: modal selection probability, service quality, transportation demand. An argument often heard in Interstate Com-merce Commission railroad abandonment hearings is that deterioration of railroad ser-vice quality has discouraged traffic sufficiently to cause line enterprise failure. Sensitivity of transportation demand to variations in service quality can be empirically tested. If transpor-tation demand truly is sensitive to service quality, then (a) transport price elasticity es-timates ignoring service quality will be biased and misleading, (b) simple traffic forecasting techniques will generate unreliable results, and (c) measurement of this sensitivity will provide a basis for adjustment of service stan-dards to more effectively and efficiently serve shipping customers. Empirical work with freight transportation demand is new enough that its chief value lies in developing a stock of methodological and statistical experience. This article offers a method for estimating the influence of trans-portation service quality upon transportation demand. The method is demonstrated em-pirically for grain shipments from country elevators. The empirical analysis illustrates the method. Further empirical experience Marc A. Johnson is an assistant professor of agricultura