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- Title
JOINT AND OVERHEAD COST AND RAILWAY RATE POLICY.
- Authors
Wallace, Donald H.
- Abstract
The article discusses joint and overhead costs in relation with the railway rate policy. Joint cost justifies some discrimination in rates charged to consumers with differing intensities of demand even after capacity is best utilized; while in the case of those services produced with overhead cost, but without any element of jointness, uniformity rather than discrimination is appropriate when the state of demands is such that best utilization can be obtained with uniform rates to all consumers. The essential element in joint supply, which prevents the equating of marginal utility and average cost, is fixity of proportion in the productive capacities available to meet the demands of different consumers. Two instances of true joint cost in the railway industry are now generally accepted. First, the provision of facilities for transportation in one direction involves making available roughly the same capacity for carriage in the opposite direction. Second, any size of investment is joint for production at different times. Any given size of investment provides capacity, which can be made available in differing proportions to serve different demands. Joint cost justifies different average rates at periods characterized by differing intensity of demand in order to earn the investment costs, which are joint for them.
- Subjects
RAIL freight rates; OVERHEAD costs; INDUSTRIAL costs; ABSORPTION costing; TRANSPORTATION; COST allocation; VARIABLE costs; LAW
- Publication
Quarterly Journal of Economics, 1934, Vol 48, Issue 4, p583
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1883543