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Unit 2 - Transport Cost Structures & Pricing, In depth pricing tacts,…
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In depth pricing tacts
- Total Cost Pricing: Covers two aspects;
- Standing costs are period-bound obligations related to the vehicle i.e. Depreciation, licenses, and insurance, and
- Running costs, which vary with the vehicle output and are assigned to the distance traveled
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- Marginal Cost pricing(MC pricing):
- Variable costs are the marginal trip cost, and overhead costs are indirect fixed costs.
- No direct relation between trips and overhead costs.
- Can't link standing costs to a particular trip thus a casual relationship between standing costs and vehicle usage.
- application of MC is the minimum cost recovered = cost that might be avoided by canceling service
- Value of service Pricing(VSP): focuses on the maximum tariff attached by users(i.e. effectiveness pricing),
VSP is determined by;
- place and time utility,
- reliability
Tariffs are feasible if the service is unmatched
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