Friday, September 22, 2006

U-Haul Rates Reflect Relative Demand

Here are the U-Haul rates for a one-way truck rental on a 26-ft truck in October 2006, from U-Haul's website for one-way rental quotes:

Flint to Nashville: $1730
Nashville to Flint: $433

Flint to Jacksonville: $1884
Jacksonville to Flint: $432

Flint to Altanta: $2312
Altanta to Flint: $272

Same equipment, same distance, but it is 8.5X more expensive to move OUT of Flint compared to moving TO Flint!! Can you predict which direction people are moving based on these market prices for one-way truck rentals?

Like airlines price tickets, U-Haul prices one-way rentals dynamically, based on relative demand at any given point in time. Ceteris paribus, if it is 8.5X more expensive to rent a truck from Altanta-Flint than Flint-Atlanta, it is precisely because there are 8.5X more households wanting to go from Flint-Atlanta than Atlanta-Flint.

I believe there is great empirical research potential here with these one-way rental data, especially if these data could be tracked over time. We can pontificate endlessly about relative tax burdens among states, differences in business climates, right-to-work issues, labor costs, union vs. non-union, desirability of differnent locations for living or doing business, etc., etc., but the U-Haul one-way rental prices reflect actual, REAL demand, based on what people are ACTUALLY doing, in terms of where they are ACTUALLY moving. Talk is cheap.... One-way rental prices are a direct measure of relative attractiveness.

For example, it would be interesting to investigate the one-way rental differentials between high unemployment states (Michgian) and low unemployment states, states with high tax burdens (Michigan) and states with low tax burdens, heavily unionized states and right-to-work states, etc. It would also be interesting to track these one-way rental data over time....


2 Comments:

At 9/23/2006 2:26 PM, Anonymous Jeff said...

A very interesting article professor. By the look of things, a person can take a flight to atlanta from flint and rent a truck from there and would still end up saving some money. That is ticket price from here to Atlanta is 351$(if a person is starting today, according to cheaptickets.com) and so the person can go there and get a truck for $272(one way) and still would spend only around 1200$ instead of $2312. A very interesting article indeed.
Regards
Jeff(Venkat)

 
At 3/16/2009 8:25 AM, Anonymous Anonymous said...

It's actually more complicated than that. If you look at U-Haul's website under FAQs, it says that the reason why it costs more to move from one location to another than the reverse trip is because "sometimes there are more trucks leaving a city than entering it, and we want more equipment to go back that way." In other words, maybe the truck is in such high demand in Chicago that they really don't want you to take it to Detroit, or vice versa.

 

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