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Value of service pricing is the pricing approach of the railroads and to some degree has found its way into the pricing models of the other modes of transportation.The railroads have presented an available model of pricing that has influenced the pricing systems of the other modes of transportation.Value of service pricing has been defined or conceptualized in a number of different ways.One definition proposes that it is pricing according to the value of the product.Another identifies it as pricing according to what the traffic will bear.One approach defines value of service pricing as third-degree price discrimination,where the seller sets two or more market prices for two or more separate groups of buyers of essentially the same commodity or service.Similar to third-degree price discrimination is differential pricing which has the carrier charging different prices to different segments of traffic for essentially the same service and the rate differences cannot be explained by differences in the cost of the service.Users of the carrier services are segmented into groups on the basis of the commodity,time of service,place,or customer.
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A) sellers and buyers of such small size that price or supply cannot be influenced.
B) existing carriers prevented from responding to new entrants' lower prices.
C) mutual interdependence between various sellers.
D) no one seller controls a significant portion of the market.
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As previously mentioned,carriers have no...View Answer
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A) the amount found in a Tariff Book as payment to a carrier for performing a transport service
B) a lawful charge imposed by a carrier on a commodity movement
C) a value or level that is determined based on prevailing market forces
D) a charge determined primarily by considering a carrier's costs only
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A) mileage
B) commodity
C) standard
D) discount
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Value of service pricing is defined as charging what the traffic will bear.
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A) slight as the conditions for each are quite similar.
B) under pure competition there are many sellers and the product is homogeneous
C) while there many sellers, there is some differentiation in the product
D) not as great as there are with an oligopoly
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A) pricing based upon common costs
B) what the traffic will bear
C) picing based on marginal costs
D) pricing based on average costs
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Pricing objectives for a carrier should ...View Answer
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Social responsibility pricing forgoes sa...View Answer
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Carrier pricing decisions are grouped in...View Answer
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A) by comparing fixed costs with variable costs
B) by determining all the areas which the carrier can serve effectively
C) by generally describing all possible origin and destination points for each commodity
D) by identifying the relevant market area for one commodity moving between two points
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A) price
B) rate
C) demand charge
D) supply charge
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A) charging a rate which includes a high profit
B) charging all the traffic will bear
C) charging a price which favors one mode over another
D) charging a rate that has shown that shippers will use it to move their traffic
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A) reduce variable costs.
B) increase fixed costs.
C) increase customer satisfaction with services rendered.
D) prohibit the movement of freight or passengers.
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A) Rates based upon average or fully allocated cost makes it necessary to apportion common costs by some arbitrary means.
B) Motor carriers are structured such as to make allocation extremely difficult.
C) Rail carriers have difficulty defining their common costs as they have wide spread geographic operations
D) All transport firms have significant difficulty with cost concepts due the very nature of their operations
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Create market-driven...View Answer
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The first step is to determine the rate ...View Answer
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Third-degree price discrimination is where the seller sets two or more market prices for two or more separate groups of buyers of essentially the same commodity or service.Before third-degree price discrimination can be practiced three necessary conditions must be met.
The first condition is that the seller must be able to separate buyers into groups or submarkets according their different elasticities of demand which enables the seller to charge different prices in the various markets.
The second condition is that the seller must be able to prevent transfer of sales between the submarkets,so that buyer cannot buy in the lower-priced market and sell in the higher priced market.
The third condition is that the seller must possess some degree of monopoly power.
Whatever the definition applied,each commodity moves according to its own unique demand characteristics,and carriers may find value of service or differential pricing attractive for many reasons.However,the modes can experience difficulties with the model.The model fits the railroads and their cost structure,but railroads are not very profitable.The pipelines fit the model because they have high fixed costs and much excess capacity,but face limitations due to their limited product and geographic flexibility.The cost structure of the motor,water,and air carriers--a high proportion of variable costs,limits their pricing flexibility under the model.
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Competition between a few large sellers ...View Answer
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