The evolution of contracting: evidence from the US freight rail industry.

This article investigates the evolution and determinants of contracting versus spot market transactions in the U.S. freight rail industry, using a comprehensive dataset of millions of shipments from 1984 to 2014. It finds that the propensity to use contracts—legally enabled by the 1980 Staggers Rail Act—has increased over time and varies significantly across commodities, driven by factors such as legislative changes, transaction complexity, asset specificity (e.g., specialized railcars and private car ownership), contracting experience, intra- and inter-industry competition, and technological innovations like intermodal shipping. Empirical results show that contracting is more likely when shipment origins and destinations are stable, asset specificity is high, experience with contracting grows, and competition from alternative transport modes (e.g., water barges) is proximate and viable. The study contributes to transaction cost economics by highlighting time-varying influences on governance choices and suggests further research in other industries and on contract features, while noting limitations related to data scope and industry specificity.