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Spatial Nonlinear Pricing with Per-Trip versus Per-Unit Transportation Costs

Author

Listed:
  • Mark L. Burkey

    (North Carolina A&T State University)

  • Alexandra Kurepa

    (North Carolina A&T State University)

Abstract

In this paper, we introduce a nonlinear pricing model with transportation costs that do not vary with the quantity purchased. In contrast to the quantity discounts seen in a model with per-unit transportation charges, we find that the optimal nonlinear pricing schedule takes the form of either a two-part tariff or package pricing, which appears to be consistent with observed pricing structures. We compare efficiency measures between optimal nonlinear pricing and the single price monopoly result, finding that per trip transportation costs can lead to qualitatively different results for pricing structure and efficiency measures.

Suggested Citation

  • Mark L. Burkey & Alexandra Kurepa, 2016. "Spatial Nonlinear Pricing with Per-Trip versus Per-Unit Transportation Costs," The Review of Regional Studies, Southern Regional Science Association, vol. 46(3), pages 237-255, Winter.
    • Handle: RePEc:rre:publsh:v46:y:2016:i:3:p:237-255
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    References listed on IDEAS

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    More about this item

    Keywords

    monopoly; spatial pricing;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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