Stability of Appalachian Coal Shipments under Policy Variation

Abstract

This article investigates the critical issue of how Appalachian coal supply flows vary in response to changes in national coal markets and policies, with emphasis on the relative stability of traditional flows. The approach taken to analyze this stability involves the use of a quadratic programming (QP) transportation model (see Takayama and Judge, 1971), along with a nonparametric statistical procedure (see Gibbons 1976, and Cooper, 1971). This approach is deemed appropriate for several reasons. First, the QP formulation permits the mechanism of price adjustment to become endogenous. Second, the mathematical property of the base-shifting flows under random shocks is almost intractable, confirming the validity of combining the statistical and mathematical programming approaches. Third, coal characteristics that differ among regions, such as sulfur and ash content and degree of washability, permit a comparison of the "relative" positions (ranking of dominance) of 13 major coal trade flows in the Appalachian area.