The Theory of Pricing

Abstract

Recent discussion relating pricing theories to transport has generally distinguished between the pricing of ‘infrastructure’ and that of final transport services [57]. The meaning of ‘infrastructure’ has not always been clearly defined, but it is usually assumed to be capital equipment supplied by the State or some other public authority. Roads, bridges, canals, docks and airports can all be described as transport infrastructure. In discussing infrastructure pricing, and particularly the pricing of roads, economists have attempted to apply distribution theory to the transport situations and to work out an optimum pricing policy. There is of course no reason why this theory should not also be applied to the pricing of capital equipment not supplied by the public sector or to final transport services (such as rail passenger miles or lorry ton miles). The reasons for concentrating on infrastructure pricing seem to have been that this is the special concern of governments, who have sponsored discussion and research, and that there has appeared to be more opportunity for considering the widest social implications where public prices were concerned. The managers of a profit-maximising road haulage undertaking may have to face technical problems (such as the difficulties of measuring the costs of specific operations), but the narrowness of their objective greatly limits the possibilities of varying their pricing policy.