In Defense of the Long-Haul/Short-Haul Discrimination

David Friedman ()

Bell Journal of Economics, 1979, vol. 10, issue 2, 706-708

Abstract: Discriminatory pricing by railroads may be better than marginal cost pricing with a subsidy of the resulting losses, since it gives the railroad correct incentives for deciding what rail lines to build. The argument, applied to long-haul/short-haul discrimination, shows that its prohibition may lead to nonoptimal construction decisions.

Date: 1979
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