FSP 1.1: Commuting elasticity

December 19, 2002

Commuting elasticity

The Golden Gate Bridge toll increased from three to five dollars on
2002 September 01 .

In the three ensuing months, 82,000 fewer cars have paid the toll,
but revenue shot up 45 percent, meaning the district collected seven-
million dollars more compared to the same three-month period in 2001.
--Bob Melrose, KCBS News.

Compare to:
The data on actual sales can be used to estimate how demand
responds to price changes. The authors find that a 1 percent price
increase at Amazon reduces sales there by about 0.5 percent, but
a 1 percent price increase at Barnes & Noble means a 4 percent
sales decline — eight times as large.

The difference in price responsiveness is striking. It appears
that Amazon's investment in building customer loyalty has paid off.
Of course, all that investment in customer loyalty is expensive,
and loyalty doesn't necessarily translate directly into profit.
-- Hal Varian, NYT

Posted by dc at December 19, 2002 06:57 PM | TrackBack

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