Price ceiling policy on oligopsony truck freight market

Abstract

The road freight transportation market in Korea has oligopsony structure characteristics like the labor market. In this study, based on the oligopsony model, panel data analysis is used to measure the leverage of each market stakeholder

service providers, consumers, substitution, and the government. The result shows that although the government does not apply price ceiling regulation in the trucking industry, regulating on freight railway rate operates as the maximum rate regulation to the road freight transportation market. Meanwhile, supply and demand do not affect the road freight rate. Recently, the Korean government releases enforcing minimum rate regulation to the trucking industry called ‘Safety rate regulation’ to reduce the frequency of the accident caused by freight vehicles. However, the government ought to consider the price regulation for the other transportation simultaneously to achieve the goal of the regulation. Moreover, to reduce shock to the market, the government should enact the additional regulations and support developing technology that can increase labor productivity in the freight transportation market.