I landed at SFO yesterday. My airfare included some charges for airport fees which the airline itemises separately.
British Airways also got charged some money by the airport to land their plane. And because it was a 747, they got charged a lot more than the turboprop that followed us.
Not only that, but assume SFO is the only Bay Area airport with runways long enough for a 747. A local monopoly on longhaul traffic.
So we’ve got double-dipping and price discrimination of traffic.
Is this a problem? If not, why not? Or is freedom of travel a bad metaphor for freedom of speech, and a false analog?
What if Ed and Ivan could offer DSL for “free”, if you were willing to restrict your activities to accessing preferred partners Yahoo and Amazon? Would this be a good or a bad thing?
We now return to blog silence, at least until the next time the urge to post overwhelms the urge to take a rest.
UPDATE: Some additional thoughts from a phone call I just had. People think of the roads as “free” common infrastructure. A few roads are built with tolls. Many roads get congested. Sometimes there are congestion charges (e.g. London, Stockholm) that impose a monetary charge to reflect that your journey has negative externalities for other people. But more usually charging money turns out to be a political hot potato, and everyone has to pay for congestion as a time cost. There’s still a cost. We can even put a value on the wasted time, if somewhat less precisely. But a cost there most certainly is. So be wary of analogies between roads as infrastructure and Internet as infrastructure. The former is already shoulding a horrendous deadweight loss because of deficiencies of congestion and access pricing.
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Usually I agree with you, but not in this case. I think your missing the point. You are talking about price discrimination in the sense of different prices for different services. That's OK. What is not OK is discrimination by the provider/infrastructure owner between applications and/or users for the same service. Like JAL will be charged more for landing on SFO than Garuda because Japan's GDP is 100 x higher than Indonesia.
Posted by: at January 24, 2006 10:05 PMYep. We see this in the way PhoneGnome owners are provided a choice of Internet to PSTN providers and plans. They can choose a semi-integrated partner plan, or any service "out there" on the Internet at large that supports the right interoperable standards. Some people want "free minutes" and will "pay" whatever price in terms of inconvenience, hassle, restrictions etc, to get it, whereas others prefer to pay a little more for some specific benefit (support staff, friendly help, whatever). The marketplace decides, not TelEvolution/PhoneGnome. I'm a believer. Give us price discrimination (as long as there is a competitive marketplace)!
But wait. What do we do when we don't have that combination of conditions, as we find in the US duopoly? I don't have the answer.
Posted by: at January 25, 2006 06:16 AM"So be wary of analogies between roads as infrastructure and Internet as infrastructure. The former is already shoulding a horrendous deadweight loss because of deficiencies of congestion and access pricing."
The most important difference to recall is that the roads aren't doubling in capacity every 18 months...
Scarcity AKA congestion isn't a real factor in commons like the Internet which appear to be autocatalytic.
Posted by: at January 28, 2006 07:03 PMPrice discrimination based on ability to pay can actually make sense. Grocery coupons are an example of this. On average, lower income people are more likely to clip coupons and thus pay less for the same items. The producers use coupons as a way to segment the market based on more individualized demand characteristics that in turn are correlated with income level.
Some forms of price discrimination do seem intuitively illegitimate. But it's very hard to think of an ex ante rule that would throw out the bath water without the baby.
Posted by: at January 30, 2006 04:18 PM