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Ramsey pricing in practice: the case of the Norwegian ferries

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  • Jørgensen, Finn
  • Pedersen, Hassa
  • Solvoll, Gisle

Abstract

The article develops a cost model for ferry operators, which enables us to estimate how long-run marginal costs for transporting different categories of vehicles are related to trip lengths. The model is estimated using cross-sectional data from 64 ferry services in Norway. The present fare system for the ferries is then compared with marginal costs and with Ramsey fares with the presumption that the ferries' subsidy needs are at today's level. Ramsey pricing implicates steeper relationships between fares and trip lengths than present fares, in particular for heavy vehicles. Consequently, fares based on general principles of economic welfare should, under present financial constraints for the ferry operators, lead to lower fares for short journeys and significantly higher fares for long journeys.

Suggested Citation

  • Jørgensen, Finn & Pedersen, Hassa & Solvoll, Gisle, 2004. "Ramsey pricing in practice: the case of the Norwegian ferries," Transport Policy, Elsevier, vol. 11(3), pages 205-214, July.
    • Handle: RePEc:eee:trapol:v:11:y:2004:i:3:p:205-214
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    References listed on IDEAS

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    1. Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
    2. Piet Rietveld & Kenneth Button & Peter Nijkamp (ed.), 2003. "Urban Transport," Books, Edward Elgar Publishing, number 2266.
    3. van Vuuren, Daniel, 2002. "Optimal pricing in railway passenger transport: theory and practice in The Netherlands," Transport Policy, Elsevier, vol. 9(2), pages 95-106, April.
    4. Pedersen, Pål Andreas, 2003. "On the optimal fare policies in urban transportation," Transportation Research Part B: Methodological, Elsevier, vol. 37(5), pages 423-435, June.
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    Cited by:

    1. Bigerna, Simona & Bollino, Carlo Andrea, 2016. "Ramsey prices in the Italian electricity market," Energy Policy, Elsevier, vol. 88(C), pages 603-612.
    2. Škurić, Maja & Maraš, Vladislav & Davidović, Tatjana & Radonjić, Aleksandar, 2021. "Optimal allocating and sizing of passenger ferry fleet in maritime transport," Research in Transportation Economics, Elsevier, vol. 90(C).
    3. Zhisong Chen & Keith C.K. Cheung & Manyi Tan, 2019. "Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing," IJERPH, MDPI, vol. 16(19), pages 1-22, September.
    4. Jørgensen, Finn & Mathisen, Terje Andreas & Larsen, Berner, 2011. "Evaluating transport user benefits and social surplus in a transport market--The case of the Norwegian ferries," Transport Policy, Elsevier, vol. 18(1), pages 76-84, January.
    5. Finn Jørgensen & Terje Andreas Mathisen, 2009. "Using Standardized Revenue and Cost Norm Analyses to Reveal Subsidy Fraud in Contracted Public Transport Services," Transport Reviews, Taylor & Francis Journals, vol. 30(3), pages 299-313, April.
    6. Jørgensen, Finn & Solvoll, Gisle, 2018. "Determining optimal frequency at ferry crossings," Transport Policy, Elsevier, vol. 63(C), pages 200-208.
    7. Chunqin Zhang & Yuting Hu & Anning Ni & Hongwei Li, 2019. "Compensation Scheme for Self-Employed Bus Service Requisitions in Urban–Rural Passenger Transport," Sustainability, MDPI, vol. 11(18), pages 1-20, September.
    8. Konstantinos Rigas, 2012. "Connecting Island Regions – A Qualitative Approach to the European Experience," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 62(3-4), pages 30-53, July - De.
    9. Clark, Derek J. & Jørgensen, Finn & Mathisen, Terje Andreas, 2011. "Relationships between fares, trip length and market competition," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(7), pages 611-624, August.
    10. Clark, Derek John & Jørgensen, Finn & Mathisen, Terje Andreas, 2014. "Competition in complementary transport services," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 146-159.

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