Question

Use Best Response Curve and Isocost Curve = Labor Discipline Model to analyze “game” between trucking companies and drivers.

Background: In the past drivers made by mileage between pick up and delivery points which gave drivers and incentive to maximize mileage, (i.e., drive from NYC to LA in two days in spite of safety rules limiting hours driven per day). Drivers previously recorded fake driving time data to show DOT, but now DOT requires Electronic Logging which operates while a truck is running and records miles and time. Electronic logging will reduce opportunity for drivers to maximize miles/income. Also, most drivers view time on the road away from home as work time. Trucking companies must bid against drivers opportunity costs of working elsewhere when unemployment is low.  

Questions:

Pay based on mileage is a form of piece rate. Why have trucking companies preferred mileage based compensation?

What has changed that makes companies considering moving to hourly compensation? How will firms monitor drivers work effort?

Use the labor discipline model to show the effect on trucking companies of low unemployment and a tight market for workers in other industries.  

Answer 1