tments to In the 1950s, in a state whose name we've forgotten, flowed the Panha River, named for the vicious fish that made crossing the river hazardous "Toeless Joe Jackson, one of the few wetters to survive a piranha attack, decided to form a barge company that would ferry people and goods across the river. He was assured that the state legislature would grant him monopoly rights for twenty-five years, meaning they would permit no other ferries to operate within twenty miles on either side of his crossing Jackson claimed the needed such protection to his investment The barge would move along a cable moored to each shore, and a steam engine mounted on the bure would pull the cable around a drum. Jackson and his financial backers realized that they would need receipts of at least 5500 per year to make their investment worthwhile. They had heard that railroads charged different prices for each type of product carried and decided that the to finance their project was to bargain for as high a rate as they could from cach potential user and then to get the individual to sign a long-term commit- ment to use the barge service contingent on the barge company's being able to find d enough commitments to make the entire venture worthwhile. bribing Jackson and his associates were able to get long term commitments from to the condition that Jackson and his associates could find enough produce receipts of at least 500 per year. (Only dollar amounts of the commitments are given here, the actual contracts specified tonnages as well, but the capac ity of the barge far exceeded the total expected tonnage.) The commitments are listed here in alphabetical order, and each is the amount the potential user would pay on an annual basis: Aachen Watch Works a German firm) $100 to ship watches and band Instruments Aardvark Coal Company-550 to ship coal. Aaron's Lumber Company-540 to ship firewood. Abalone Shell Company510 to ship shell chips (used in concrete Abandon Tools, Inc. $80 to haul carpenters' tools Abattoir Packers-530 to ship hides. Abbott Enterprises-590 for the carriage of books, Abigail's Grocery-370 for the handling of fresh produce. Able Flour Mills 560 for shipping grain. Abner & Sons--$10 for carrying sand. Abraham Bros.--$30 for carrying hay. Mike's Gravel-515 for the hauling of gravel Penelope's Stables--$20 for the carriage of straw. Zouave Bros. Inc.-315 for the shipment of cinders. Questions 1. Can Jackson and his friends pay for the barge operation? Yes 2. If so, can they rely on average cost pricing? Why or why not? Yes, it is comptitica 3. Assume that they are concerned that other shippers of similar products may come along and that, in faimess to existing customers, Jackson will want to charge the same rate for similar commodities. He therefore con structs a commodities tariff, listing each product and its rate. What is the minimum number of different prices he can charge? What would his commodity tariff look like? 4. Are there any products that the Piranha River Barge Company should refuse to handle? If so, what are they? 5. What is the minimum rate Piranha should charge for handling any other new business that may develop? 6. Assume that at the end of the twenty-five-year monopoly period, the oper ator of a small, fast boat wants to take away some of the barge company's business. Which customers do you think he would go after first? Why? PIRANHA RIVER BARGE COMPANY tments to In the 1950s, in a state whose name we've forgotten, flowed the Panha River, named for the vicious fish that made crossing the river hazardous "Toeless Joe Jackson, one of the few wetters to survive a piranha attack, decided to form a barge company that would ferry people and goods across the river. He was assured that the state legislature would grant him monopoly rights for twenty-five years, meaning they would permit no other ferries to operate within twenty miles on either side of his crossing Jackson claimed the needed such protection to his investment The barge would move along a cable moored to each shore, and a steam engine mounted on the bure would pull the cable around a drum. Jackson and his financial backers realized that they would need receipts of at least 5500 per year to make their investment worthwhile. They had heard that railroads charged different prices for each type of product carried and decided that the to finance their project was to bargain for as high a rate as they could from cach potential user and then to get the individual to sign a long-term commit- ment to use the barge service contingent on the barge company's being able to find d enough commitments to make the entire venture worthwhile. bribing Jackson and his associates were able to get long term commitments from to the condition that Jackson and his associates could find enough produce receipts of at least 500 per year. (Only dollar amounts of the commitments are given here, the actual contracts specified tonnages as well, but the capac ity of the barge far exceeded the total expected tonnage.) The commitments are listed here in alphabetical order, and each is the amount the potential user would pay on an annual basis: Aachen Watch Works a German firm) $100 to ship watches and band Instruments Aardvark Coal Company-550 to ship coal. Aaron's Lumber Company-540 to ship firewood. Abalone Shell Company510 to ship shell chips (used in concrete Abandon Tools, Inc. $80 to haul carpenters' tools Abattoir Packers-530 to ship hides. Abbott Enterprises-590 for the carriage of books, Abigail's Grocery-370 for the handling of fresh produce. Able Flour Mills 560 for shipping grain. Abner & Sons--$10 for carrying sand. Abraham Bros.--$30 for carrying hay. Mike's Gravel-515 for the hauling of gravel Penelope's Stables--$20 for the carriage of straw. Zouave Bros. Inc.-315 for the shipment of cinders. Questions 1. Can Jackson and his friends pay for the barge operation? Yes 2. If so, can they rely on average cost pricing? Why or why not? Yes, it is comptitica 3. Assume that they are concerned that other shippers of similar products may come along and that, in faimess to existing customers, Jackson will want to charge the same rate for similar commodities. He therefore con structs a commodities tariff, listing each product and its rate. What is the minimum number of different prices he can charge? What would his commodity tariff look like? 4. Are there any products that the Piranha River Barge Company should refuse to handle? If so, what are they? 5. What is the minimum rate Piranha should charge for handling any other new business that may develop? 6. Assume that at the end of the twenty-five-year monopoly period, the oper ator of a small, fast boat wants to take away some of the barge company's business. Which customers do you think he would go after first? Why? PIRANHA RIVER BARGE COMPANY