Consider the problem of modeling the price charged for motor transport service. In the early 1980s, several states removed regulatory constraints on the rate charged for intrastate trucking services. (Florida was the first state to embark on a deregulation policy on July 1, 1980.) Prior to this time, the state determined price schedules for motor transport service with review and approval by the Public Service Commission. Once approved, individual carriers were not allowed to deviate from these official rates. We want to estimate a model of the supply price for predicting future prices.
The data employed for this purpose (n = 134 observations) were obtained from a population
of over 27,000 individual shipments in Florida made by major intrastate carriers before and
after deregulation. The shipments of interest were made by one particular carrier whose
trucks originated from either the city of Jacksonville or Miami. The dependent variable of
interest is y, the natural logarithm of the price (measured in 1980 dollars) charged per
ton-mile. The independent variables available for predicting y are listed and described below.
These data are saved in the TRUCKING file.
1. DISTANCE: Miles travelled (in hundreds)
2. WEIGHT: Weight of product shipped (in 1000 pounds)
3. PCTLOAD: Percent of truck load capacity
4. ORIGIN: City of origin (JAX or MIA)
5. MARKET: Size of market destination (LARGE or SMALL)
6. DEREG: Deregulation in effect (YES or NO)
7. PRODUCT: Product classification (100, 150, or 200) – Value roughly corresponds to
the value-to-weight ratios of the goods being shipped (more valuable goods are
categorized in the higher classification)
Note the first three variables are quantitative in nature, while the last four variables are all
qualitative in nature. Of course, these qualitative independent variables will require the
creation of the appropriate number of dummy variables: 1 dummy variable for city of origin,
1 for market size, 1 for deregulation, and 2 for product classification.