Elephants or Goldfish? An Empirical Analysis of Carrier Reciprocity in Dynamic Freight Markets

TL;DR

This paper empirically investigates carrier reciprocity in US truckload markets, revealing that carriers respond mainly to current behaviors rather than past actions, indicating short-term memory and myopic decision-making.

Contribution

It provides the first empirical evidence on how carriers' reciprocity behaviors are influenced by current versus past shipper actions in freight markets.

Findings

Carriers do not remember previous shipper pricing or performance.

Carriers respond primarily to current market behaviors.

Reciprocity is driven by present actions, not past interactions.

Abstract

Dynamic macroeconomic conditions and non-binding truckload freight contracts enable both shippers and carriers to behave opportunistically. We present an empirical analysis of carrier reciprocity in the US truckload transportation sector to demonstrate whether consistent performance and fair pricing by shippers when markets are in their favor result in maintained primary carrier tender acceptance when markets turn. The results suggest carriers have short memories; they do not remember shippers' previous period pricing, tendering behavior, or performance when making freight acceptance decisions. However, carriers appear to be myopic and respond to shippers' current market period behaviors, ostensibly without regard to shippers' previous behaviors.