Carriers' cost savings are measured as the difference between the actual costs of the carriers and the costs they would have incurred if the unit cost had increased at the same pace as in the general economy. The same methods were used to measure users' revenues. The competitive level of the industry explains the high percentage of cost savings passed on to users in lower prices. The trucking industry can be viable with an operating margin equal to about 4 per cent of its revenues. The rail industry requires a higher operating margin because it requires significantly more assets than the trucking industry to generate a dollar of revenue.
Trucking is a very competitive industry, into which entry is relatively easy.
Under such competitive forces, the market has its own clearing-house process. To survive, a firm must adjust costs to the prices dictated by the market. Within the industry overall, trends show unit costs following the same pattern as prices between 1987 and 1997. Trucking is an industry where excessive price increases are almost impossible, as they rapidly attract competitors which in turn lower prices. Figure 16-9 shows cost and price indicators for the trucking industry over the period 1987 to 1997.