This preview shows page 1. Sign up to view the full content.
Unformatted text preview: q-distance under SB I The …rst-class service level is the same under …rst and second
best, whereas the second-class service level is distorted
downwards. The intuitive reason:
I The intended …rst-class passengers mustn’ want to buy
second-class tickets instead, so let’ make second class
su¢ ciently uncomfortable! This logic was fairly accurately described already in the mid 19th
century by the French engineer Jules Dupuit (1804-1866).
J. Lagerlöf (U of Copenhagen) Microeconomics (MikØk) 3: L2-II Spring ‘
11 21 / 29 Fully Non-Linear Tari¤: Dupuit’ Conjecture (1/3)
In 1849 and 1853 Dupuit wrote* the following about the
practices of railway companies:
Only too often does the sight of third-class passengers
travelling in open or poorly sprung carriages, and always
badly seated, raise an outcry against the barbarity of the
railway companies. It wouldn’ cost much, people say, to
put down a few yards of leather and a few pounds of horse
hair, and it is worse than avarice not to do so.
[* Quoted in Beard and Ekelund (1991), “Quality Choice and Price
Discrimination: A Note on Dupuit’ Conjecture”, Southern Economic Journal 57:
1155-1163 — Not part of the syllabus!]
[“avarice” = extreme greed for wealth] J. Lagerlöf (U of Copenhagen) Microeconomics (MikØk) 3: L2-II Spring ‘
11 22 / 29 Fully Non-Linear Tari¤: Dupuit’ Conjecture (2/3)
But a bit further down the text, Dupuit explains the reason for
why, according to him, there is such a large quality di¤erence
between third- and second-class:
It is not because of the few thousand francs which would
have to be spent to put a roof over the third-class carriages
or to upholster the third-class seats that some company or
other has open carriages wit...
View Full Document
This note was uploaded on 03/31/2013 for the course CENG 216 taught by Professor Klausschmidt during the Spring '11 term at Uni. Copenhagen.
- Spring '11