Ski-Lift Pricing, with an Application to the Labor Market / Robert J. Barro, Paul M. Romer.

Format:

Book

Author/Creator:

Barro, Robert J.

Contributor:

National Bureau of Economic Research.

Romer, Paul M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1985.

NBER working paper series no. w1985

Language:

English

Subjects (All):

Profit-sharing--Econometric models.

Profit-sharing.

Ski lifts.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Cambridge, Mass. : National Bureau of Economic Research, 1986.

Summary:

The market for ski runs or amusement rides often features lump-sum admission tickets with no explicit price per ride. Therefore, the equation of the demand for rides to the supply involves queues, which are systematically longer during peak periods, such as weekends. Moreover, the prices of admission tickets are much less responsive than the length of queues to variations in demand, even when these variations are predictable. We show that this method of pricing generates nearly efficient outcomes under plausible conditions. In particular, the existence of queues and the "stickiness" of prices do not necessarily mean that rides are allocated improperly or that firms choose inefficient levels of investment. We then draw an analogy between "ski-lift pricing" and the use of profit-sharing schemes in the labor market. Although firms face explicit marginal costs of labor that are sticky and less than workers' reservation wages, and although the pool of profits seems to create a common-property problem for workers, this method of pricing can approximate the competitive outcomes for employment and total labor compensation.

Notes:

Print version record

July 1986.