THE PURPOSE OF THIS NOTE IS TO DEMONSTRATE THAT THE FLEXIBLE TECHNOLOGY ATTAINED BY TRUCKING FIRMS THROUGH THE USE OF OWNER-OPERATORS IS OPTIMUM WHEN THEY FACE A FLUCTUATING DEMAND FOR THEIR SERVICES. THE THEORY OF FIRM BEHAVIOUR UNDER CONDITIONS OF FLUCTUATING DEMAND IS SUMMARIZED. THE CONDITIONS UNDER WHICH FIRMS IN A COMPETITIVE INDUSTRY FACING FLUCTUATING DEMAND WILL PREFER A FLEXIBLE TECHNOLOGY, ARE DERIVED. SIMILAR CONDITIONS ARE ALSO DERIVED FOR FIRMS IN A PRICE-REGULATED INDUSTRY. IT IS DEMONSTRATED THAT OWNER-OPERATORS DO INDEED REPRESENT A MORE FLEXIBLE TECHNOLOGY. THE CONCLUSIONS REACHED ARE THAT THE LARGER THE SEASONAL OR CYCLICAL FLUCTUATIONS IN DEMAND FACING THE CARRIERS, THE MORE LIKELY THEY ARE TO USE OWNER-OPERATORS. THE AVAILABLE EMPIRICAL EVIDENCE IS CONSISTENT WITH THESE FINDINGS.
Abstract