A platform for research: civil engineering, architecture and urbanism
A platform for research: civil engineering, architecture and urbanism
On the problems of applying Ramsey Pricing to the railroad industry with uncertain demand elasticities
AbstractRamsey Pricing, or the Inverse Elasticity Rule (IER), has recently been proposed as a pricing strategy to improve the fortunes of the railroad industry under Interstate Commerce Commission regulation. According to the theory of Ramsey Pricing as articulated by Baumol and Bradford, rail rates would be set so that the deviation of price from marginal costs for each product or service is inversely proportional to the elasticity of demand. This paper first demonstrates that “Baumol and Bradford Ramsey Pricing” is not a practical approach to railroad ratenaking chiefly because the resulting rate structure is unduly sensitive to small changes in highly uncertain demand elasticities. Under such cirucmstances, the purported consumers' surplus benefits of Ramsey Pricing are likely to be modest and highly uncertain as well. The rail industry's proposed cure for the defects of Baumol and Bradford Ramsey Pricing, “Bayesian Ramsey Pricing”, does not provide an attractive alternative.
On the problems of applying Ramsey Pricing to the railroad industry with uncertain demand elasticities
AbstractRamsey Pricing, or the Inverse Elasticity Rule (IER), has recently been proposed as a pricing strategy to improve the fortunes of the railroad industry under Interstate Commerce Commission regulation. According to the theory of Ramsey Pricing as articulated by Baumol and Bradford, rail rates would be set so that the deviation of price from marginal costs for each product or service is inversely proportional to the elasticity of demand. This paper first demonstrates that “Baumol and Bradford Ramsey Pricing” is not a practical approach to railroad ratenaking chiefly because the resulting rate structure is unduly sensitive to small changes in highly uncertain demand elasticities. Under such cirucmstances, the purported consumers' surplus benefits of Ramsey Pricing are likely to be modest and highly uncertain as well. The rail industry's proposed cure for the defects of Baumol and Bradford Ramsey Pricing, “Bayesian Ramsey Pricing”, does not provide an attractive alternative.
On the problems of applying Ramsey Pricing to the railroad industry with uncertain demand elasticities
Tye, William B. (author) / Leonard, Herman B. (author)
Transportation Research Part A: General ; 17 ; 439-450
1983-01-01
12 pages
Article (Journal)
Electronic Resource
English
Some evidence of transit demand elasticities
| Online Contents | 1973
Estimating Price Elasticities of Ferry Demand
| British Library Online Contents | 2010
Robust Pricing of Transportation Networks Under Uncertain Demand
| British Library Online Contents | 2008
Using demand elasticities from disaggregate mode choice models
| Online Contents | 1980