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MIT1_201JF08_hw_4

# MIT1_201JF08_hw_4 - 1.201 11.545 ESD.210 Analysis Demand...

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1.201 / 11.545 / ESD.210 Transportation Systems Analysis: Demand and Economics Assignment 4 Question 1 Pricing a Trucking Service A small trucking company serves two OD pairs as represented in Figure 1. Assume that daily costs are represented by the following function: C = 100 + 5 Y 1 + 3 Y 2 0.001 Y 1 Y 2 Furthermore, demand at each OD pair is given by: Y 1 = 50 P 1 Y 2 = 25 2 P 2 where Y i is in tons/day, P i is in \$/ton, and C is in \$/day. Y 1 Y 2 Figure 1 : The network served by the trucking company Answer the following questions: a. Find the fares that: i. maximize social welfare ii. maximize profit iii. maximize social welfare subject to no losses (note: this will require the use of the Excel or other numerical solver) Compare and discuss your results. b. Assume that cost complementarity between both flows is zero (i.e. the cost C = 100 + 5 Y 1 + 3 Y 2 function is ). Calculate the new optimal fares for each case in (a) and discuss the differences in your results (between (a) and (b)).

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Question 2 The Use of Pricing to Control Flow on Urban Expressways Travel on urban expressways can be described by the following simple linear relationship between the actual speed at which traffic flows ( S , measured in miles per hour) and the flow of traffic ( Q , measured
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MIT1_201JF08_hw_4 - 1.201 11.545 ESD.210 Analysis Demand...

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