Journal article Open Access

Railroads and Competition: The Santa Fe/Southern Pacific Merger Proposal

Pittman, Russell W.

The Merger Guidelines of the US Department of Justice provide the framework for a detailed analysis of the competitive implications of the proposed merger of the Santa Fe and Southern Pacific railroads. Although the gross welfare loss from the merger is found to be large--in the range of $40-230 million per year--the transfers from shippers to the railroads are much larger. Thus an overall welfare calculus requires not only an accurate estimate of the efficiencies resulting from the merger but also a judgment as to the welfare relevance of wealth transfers.

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