Abstract:
In 1993 the municipally owned utility serving Gainesville, Florida was threatening to build a 23-mile rail spur to connect its coal-fired power plant with the tracks of the Norfolk/Southern Railway. The railroad currently delivering the coal, CSXT, had announced a large rate increase to take effect at the end of its current five-year contract and had refused to allow Norfolk/Southern Railway, which was offering a lower rate, to use CSXT tracks to deliver coal to the plant. CSXT had responded to the utility's threat to build the spur by reducing its proposed rate increase and the utility now had to decide whether it should proceed with the spur or accept the new CSXT offer. This case may be used to discuss barriers to entry, market power, and appropriate public policy responses.
Learning Objective:
This case may be used to discuss barriers to entry, market power, and appropriate public policy responses.
