Working Paper: NBER ID: w24525
Authors: Thomas J. Holmes; Ethan Singer
Abstract: This paper develops and estimates a model of indivisibilities in shipping and economies of scale in consolidation. It uses highly detailed data on imports for which it is possible to observe the contents of individual containers. In the model, a firm is able to adapt to indivisibility constraints by using consolidation strategies, and by determining how dense to make its distribution network in both space and time. Indivisibilities are found to create significant scale economies in distribution.
Keywords: indivisibilities; shipping; economies of scale; consolidation; retail
JEL Codes: D24; F0; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Walmart's indivisibility costs (D23) | inbound freight costs (L91) |
| Walmart's indivisibility costs (D23) | impact on profit rate (E25) |
| splitting Walmart in half (L81) | inbound freight costs (L91) |
| indivisibilities in shipping (L87) | scale economies in distribution (D39) |
| firm size (L25) | efficiency in shipping practices (L87) |
| traditional retail models (L81) | indivisibility costs (D23) |
| online retail models (L81) | mitigation of indivisibility costs (F12) |