Define and discuss Value of Service Pricing
Value of service pricing is the pricing approach of the railroads and to some degree has found its way into the pricing models of the other modes of transportation. The railroads have presented an available model of pricing that has influenced the pricing systems of the other modes of transportation. Value of service pricing has been defined or conceptualized in a number of different ways. One definition proposes that it is pricing according to the value of the product. Another identifies it as pricing according to what the traffic will bear. One approach defines value of service pricing as third-degree price discrimination, where the seller sets two or more market prices for two or more separate groups of buyers of essentially the same commodity or service. Similar to third-degree price discrimination is differential pricing which has the carrier charging different prices to different segments of traffic for essentially the same service and the rate differences cannot be explained by differences in the cost of the service. Users of the carrier services are segmented into groups on the basis of the commodity, time of service, place, or customer.
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