Pricing Policies for the Space Shuttle

by John P. Stein, Charles Wolf, Jr.


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Considers the economic principles germane to the formulation and evaluation of alternative pricing policies for the space shuttle. The paper is intended to be a decisionmaker's guide in analyzing and comparing alternative pricing policies. Four principal options are discussed: (1) marginal cost pricing; (2) average cost pricing; (3) profit maximum (or "monopoly") pricing; and (4) multipart pricing. Only the options of marginal cost pricing, and multipart pricing, meet the test of allocative efficiency. When the alternatives are evaluated in terms of their distributional, as distinct from their efficiency, effects, the choice among the options becomes more difficult. In choosing appropriate pricing policies for the space shuttle, as in many other policy domains, economic analysis does not lead to an unequivocal conclusion.

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