Editing Elkins Act (section)

==Impact==
Following the passage of the Elkins Act, real freight rates decreased only slightly. In 1905, leaders in the regulation movement testified before Congress to identify the reduction in prices that resulted from the Act.<ref>Elkins Act Sufficient." (1905, Jan 17), ''The Washington Post'' (1877-1924).</ref> Yet, in the first months following the passage of the law, the most pronounced change in railroad pricing was the elimination of rebates. However, later analysis has found that decreases in carrier prices are better attributable to decreases in the costs of operation due to technology advances.<ref name=harbeson>Harbeson, Robert. "Railroads and Regulation, 1877-1916: Conspiracy or Public interest?" ''Journal of Economic History.'' Vol 27, No 2 (June, 1967), pp. 230-242.</ref> The elimination of rebates led the railroads to seek other methods to compete for business, leading [[United States Governor|Governor]] [[Albert B. Cummins]] of [[Iowa]] to declare, in 1905, that the elimination of rebates simply forces railroads to seek alternative noncompetitive means to secure business.<ref name=parsons>{{cite book |title=The Heart of the Railroad Problem |chapter=The Elkins Act and its Effects |last=Parsons |first=Frank |year=1906 |publisher=Little, Brown |location=Boston |pages=[https://archive.org/details/heartrailroadpr00parsgoog/page/n124 110]–119 |url=https://archive.org/details/heartrailroadpr00parsgoog |quote=elkins act. }}</ref> The Elkins Act, thus, was more effective in stabilizing prices and entrenching price [[collusion]] than demonstrably lowering prices.

A diverse group of stakeholders publicly supported the Elkins Act. Citizens who supported the law hoped that reducing price discrimination would lower freight prices uniformly, and railroad interests lobbied for the passage of the Act as a means of enforcing collusive pricing.<ref name=sharf /> While the Act restricted preferential pricing, it did not specify what constituted a "reasonable" shipping rate; thus, railroads could use the law to entrench a system of collusive prices. [[Collusion]] is unsustainable in a market where it is easy to undercut competitors. However in industries that only have a small number of competitors (e.g. railroads, airlines, or transportation companies operating between two given cities) collusion is far more likely. The result of the Elkins Act was that railroads had a stronger mechanism to protect their collusive prices and corporate trusts were weakened in their ability to gain shipping discounts. Farmers and other railroad users, instead of benefiting from greater competition, were unaffected by the Act.{{Citation needed|date=April 2014}}

While farmers may have benefited from the establishment of a [[price ceiling]] on freight rates, the nature of the railroad industry may have not have permitted [[perfect competition]]. Economist Robert Harbeson argues that the price wars prior to the Elkins Act suggest that the railroad industry was more [[oligopoly|oligopolistic]]. In an industry with decreasing [[marginal costs]] and high [[fixed costs]], it would be futile to enforce a [[price cap]]. Moreover, he argues, stronger regulation would have prevented carriers from reaching [[economies of scale]].<ref name=harbeson/>