Indivisibilities in Distribution
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.
We thank Dominic Smith and Jonathan Willard for their research assistance on this project. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis, the Federal Reserve Board, the Federal Reserve System, or the National Bureau of Economic Research.
Thomas J. Holmes
In addition to my faculty position at the University of Minnesota, I also serve as a consultant to the Federal Reserve Bank of Minneapolis