Regulation in a ‘Deregulated’ Industry: Railroads
in the Post-Staggers Era
John W. Mayo
David E. M. Sappington
Published online: 3 June 2016
Ó Springer Science+Business Media New York 2016
Abstract The Staggers Rail Act of 1980 substantially reduced regulation of the US
freight rail industry. However, a signiﬁcant amount of rail trafﬁc remains potentially
subject to regulatory rate intervention. The prevailing regulatory framework
embodies elements of traditional public utility regulation, including fully distributed
costing. Furthermore, explicit earnings regulation may be under consideration. This
research reviews the evolution of regulatory policy in the rail industry and docu-
ments some of the many potential drawbacks to explicit earnings regulation.
Keywords Cost allocation Earnings regulation Railroad deregulation Railroad
The rail industry was in dire economic straits prior to the passage of the Staggers Rail Act
Industry output, productivity, and investment were all relatively low, and rail
carriers were suffering substantial ﬁnancial losses. The losses arose despite the prevalence
of extensive regulatory policy that was designed in part to promote carrier solvency.
light of the limited success of nearly ubiquitous regulatory oversight, the Staggers Act
took a different approach to enhancing industry performance. The Act afforded rail
& John W. Mayo
McDonough School of Business, Georgetown University, Hariri Building, 37th and O Streets,
NW, Washington, DC 20057, USA
Department of Economics, University of Florida, P.O. Box 117140-7140, Gainesville,
FL 32611, USA
Public Law 96–448, 94 Stat. 1895, codiﬁed as amended at 49 U.S.C. §10101.
See Gallamore and Meyer (2014), for example.
Rev Ind Organ (2016) 49:203–227