Mind map

Costing and Pricing for Transportation

Korima Esparza Spanish

Map content

Market structure models
- Pure competiotion
  - large number of sellers.
  - unrestricted entry
  - no one can influence prices
- perfectly monopolistic market
  - no close competitor or substitute
- oligopoly
  - small number of producers
- monopolistic competition
  - differentiation of products
  - no one controls a significant portion of the market
cost-of-service pricing
- only one group of customers involved
- this group is responsible for all costs
- the firm possesses some degree of monopoly power
- average cost
- marginal cost
- Decreasing Cost
- common costs
- Value-of-service pricing
  - maximum revenue
  - no service should be charged a lower price if could bear a higher price.
product or service is homogeneous
maximize profits
- produce quantity Qm
- charge price Pm
Value-of-service pricing
- pricing according to the value of the product
- third-degree price discrimination
- differential pricing
Rate making in practice
- general rates
- Exception rates
- Commodity rates
- Class Rates
  - rate base point
  - rate basis number
Rate Systems Under Deregulation
- limited
- Special Rates
  - Character-of-Shipment Rates
    - LTL/TL Rates
    - Multiple-Car Rates
    - Incentive Rates
    - Unit-Train Rates
    - Per-Car and Per-Truckload Rates
    - Any-Quantity Rates
    - Density Rates
Area, Location or route rates
- Local Rates
- Joint Rates
- Proportional Rates
- Differential Rates
- Per-Mile Rates
- Terminal-to-Terminal Rates
Time/Service Rate Structures
- Contract Rates
- Deferred Delivery
- Other Rate Structures
  - Corporate Volume Rates
  - Discounts
  - Loading Allowances
  - Aggregate Tender Rates
  - FAK Rates
Most Common Mistakes in Pricing
- make pricing too reliant on costs
- prices are not revised frequently enough
- proce not varied enough
References: Coyle. (2011). Transportation a supply chain perspective. Ohio: Cengage Learning Ch. 4