Alternative Pricing Systems Research Articles

Welfare Effects of Nonlinear Electricity Pricing

Block pricing is widespread among electricity and water utilities to protect low-income households and to encourage energy conservation through higher marginal prices. However, whether a block pricing system achieves those objectives is controversial. In this article, we analyze the impact of alternative electricity pricing systems on the welfare of consumers for the case of residential electricity block pricing in Korea. To do this, we first develop a theoretical model to compute each household’s welfare change under alternative pricing systems. Then, we estimate the residential electricity demand function and compute every household’s electricity consumption and expenses under alternative pricing systems.Finally, we compute each household’s welfare change and social welfare to draw policy implications.

Culture change through the use of appropriate pricing systems

PurposeThe purpose of this paper is to show how practitioners have not fully responded to calls for change in culture. Given that construction teams are motivated by several key factors including money, payment systems may play a major role in facilitating this change. Traditional pricing methods are still found to be the most popular system but often criticised for their contribution to the adversarial culture witnessed in the industry. Alternative pricing systems aimed at aligning constructors' behaviour with clients' objectives are emerging. As a result, the choice of an appropriate pricing system must be based on the circumstances surrounding the project and the likelihood that the system is to influence behaviour positively. This paper aims to propose an analytical hierarchic process (AHP) to help the industry do that.Design/methodology/approachThe AHP consists of a MCDM hierarchy structure, pair‐wise comparisons, and the calculation of the relative priorities of MCDM attributes. The attributes used have been identified through a series of interviews followed by postal questionnaires.FindingsThe paper results in the development of a decision aid tool for use by the industry to select appropriate pricing systems. This tool identifies seven project objectives as being important for deciding on what pricing system to adopt.Originality/valueThere has been limited research on how pricing systems are being selected, or should be selected. The novelty of this paper stems from the subject area being addressed, rather than the methodologies being adopted.

New workers' compensation legislation: Expected pharmaceutical cost savings

California Workers' Compensation (WC) system costs are under review. With recently approved California State Assembly Bill (AB) 749 and Senate Bill (SB) 228, an assessment of proposed pharmaceutical cost savings is needed. A large workers' compensation database provided by the California Workers' Compensation Institute (CWCI) and Medi-Cal pharmacy costs obtained from the State Drug Utilization Project are utilized to compare frequency, costs and savings to Workers' Compensation in 2002 with the new pharmacy legislation. Compared to the former California Workers' Compensation fee schedule, the newly implemented 100% Medi-Cal fee schedule will result in savings of 29.5% with a potential total pharmacy cost savings of $125 million. Further statistical analysis demonstrated that a large variability in savings across drugs could not be controlled with this drug pricing system. Despite the large savings in pharmaceuticals, inconsistencies between the two pharmaceutical payment systems could lead to negative incentives and uncertainty for long-term savings. Proposed alternative pricing systems could be considered. However, pain management implemented along with other cost containment strategies could more effectively reduce overall drug spending in the workers' compensation system.

Alfalfa Hay Quality and Alternative Pricing Systems

Price-quality relationships for alfalfa hay were analyzed by hedonic pricing models using 1996-2001 Wisconsin auction data. Individual nutrients included in the analysis all affected alfalfa price, with acid detergent fiber accounting for the largest impact. Alternative pricing models, based on an aggregate quality index or detailed quality information, were similar in their ability to predict price. However, disaggregating price predictions to account for differences in relative feed value (RFV) and crude protein (CP) indicate that bothRFVandCPare important determinants of price and that aggregating the two into a quality index is not warranted.

Towards marginal cost pricing: A comparison of alternative pricing systems

European urban areas are marred by the problems of congestion and environmental degradation due to the prevailing levels of car use. Strong arguments have thus been put forward in support of a policy based on marginal cost pricing (European Commission 1996). Such policy measures – which would force private consumers to pay for a public service that was previously provided "for free" – are, however, notoriously unpopular with the general public and hence also with their elected representatives – the politicians. There is thus an obvious tension between economic theory, which suggests that marginal cost pricing is the welfare maximising solution to urban transport problems, and practical experience, which suggests that such pricing measures are unwanted by the affected population and hence hard to implement through democratic processes. The AFFORD Project for the European Commission has aimed to investigate this paradox and its possible solutions, through a combination of economic analysis, predictive modelling, attitudinal surveys, and an assessment of fiscal and financial measures within a number of case study cities in Europe. In this paper the methodology and results obtained for the Edinburgh case study are reported in detail. The study analyses alternative road pricing instruments and compares their performance against the theoretical first best situation. It discusses the effect of coverage, location, charging mechanism and interaction with other instruments. The paper shows that limited coverage in one mode may lead to a deviation from the user pays principle in other modes, that location is as important as charge levels and that assumptions about the use of revenues are critical in determining the effect on equity and acceptability. Finally the results show that a relatively simple smart card system can come close to providing the economic first best solution, but that this result should be viewed in the context of the model assumptions.

Regulating Drug Prices: Where Do We Go from Here?

AbstractThis paper examines the arguments for changing the ways that UK drug prices are regulated. In the UK, NHS pharmaceutical expenditures on branded drugs, currently worth about £3 billion a year, have been regulated by the Pharmaceutical Price Regulation Scheme (PPRS) since 1978. We argue that, in publicly funded healthcare systems, pharmaceutical price regulation is necessitated by a tendency towards excessive government expenditure because of over‐prescription and the monopoly power of firms with on‐patent drugs. We briefly explain the operation of the PPRS. which is based on rate‐of‐return regulation, and discuss its merits and drawbacks. We then consider five alternative pricing systems: free pricing, therapeutic benefit pricing, international reference pricing, therapeutic reference pricing and RPI ‐ X price regulation. However, we reject all these alternatives in favour of a reformed PPRS. We suggest three potential reforms of the PPRS: an RPI ‐ X cost allowance if feasible or a widening of the rate‐of‐return bands otherwise; the introduction of a marketing innovation allowance; and greater regulatory transparency. JEL classification: L5, L6, D4.

Airport pricing systems in europe and an application of Ramsey pricing to Spanish airports

Abstract This paper describes the landing fee structures which are prevalent at most European airports: a mix of weight-based landing fees, passenger fees, and other charges. The paper describes alternative pricing systems which emphasize economic efficiency rather than airport finance considerations. Finally the paper calculates the structure of landing fees for a hypothetical uncongested airport using a Ramsey pricing formulation with data representative of uncongested Spanish airports. Further research is necessary before recommending implementation because the elasticities of demand and operating costs with distance are borrowed from North American studies.

Optimal Hog Slaughter Weights Under Alternative Pricing Systems

AbstractThree hog genotypes are simulated to determine how producer profits, economically optimal slaughter weights, and carcass component weights change under three pricing models. Live weight pricing pays more for the fatter barrows whereas a three component (separate payments for fat, lean, and byproducts) and six component (separate payments for major primal cuts, other lean, fat, and byproducts) pricing system pay more for the leaner gilts. Implications for selection of genetic stock and pricing system are presented.

Effect of Carcass Pricing Systems on Optimum Slaughter Weight, Energy Level in Feed and Choice of Sirebreed in Beef × Dairy Breed Young Bull Production

Abstract An objective system for beef carcass classification (BCC) will be available shortly. Thus, payment based on objective parameters becomes possible. Alternative pricing systems were tested on the basis of carcass composition data and visual gradings from 403 bulls. Carcass dissection data were converted into a Danish commercial cutting standard to simulate results from an objective beef classification centre. Data represented progeny of Red Danish and Danish Friesian cows sired randomly with one of the following breeds: Angus, Charolais, Gelbvieh, Piemontese, South Devon, Brown Swiss, Red Belgian, Blue Belgian, Red Danish or Danish Friesian. Bull calves were allotted at 70 d of age to three target slaughter weights (320, 440 and 560 kg) and three feeding levels (ad lib., 85 and 70% on an energy basis). The present Danish pricing system, based on EUROP grading, was compared to an alternative pricing system based on yield of saleable meat, a muscularity index, fat trim and fat/lean colour. Compared w...

Basing Point Pricing and Public Policy

I. Introduction: the nature of the problem, 289; alternative pricing systems, 292; standards of public policy, 293. — II. Pricing practices and the level and flexibility of margins, 294; and the level of costs, 297. — III. Pricing practices and the long run adaptation of capacity to demand, 300; the location of producers, 304; and the allocation of transport resources, 305. — IV. Pricing practices and capacity in relation to cyclical fluctuations in demand, 306; and the organization of the industry, 309. — V. Summary and conclusions, 313.