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> Throttling a spike using price forces everyone to pay the marginal rate, and to use price as a "good" throttle requires the logistics companies to have perfec

> Throttling a spike using price forces everyone to pay the marginal rate, and to use price as a "good" throttle requires the logistics companies to have perfect knowledge of the demand/price curve. Not really, you just keep raising prices per day until it gets to the rate you want. If you want more packages lower the price. I have no idea why you think something that has been done since the foundation of capitalism is somehow completely foreign or impossible to compute or experiment with. Unlike in an economics class companies will never solve the two equations to perfectly maximize the profit, it's more of a range and they're hoping to get close enough. That's a much more realistic approach that has historically worked.

sokoloff 6y ago
High-volume shippers have contracts with carriers, often more than one year in length. Some of them are referenced to the retail rate. Many though are defined price (including surcharges) with annual escalations. Parcel carriers have been disrupted to some extent by Amazon building out their own logistics capability both line-haul and last-mile and have been signing contracts with non-Amazon shippers to ensure they could cover their costs and make a profit. Now, pandemic hits and drives a lot of unexpected, probably just this year, traffic into parcel shipping that would have otherwise been freight to stores and passenger car to homes and there's not enough capacity. There's not as much price shaping they can do without being in violation of their contract. In a lot of cases, they know they need these big shippers next year as well, so they can't entirely burn them this year even if they were willing to litigate the contract.
- jessaustin 6y ago
  It's an interesting contract, that locks in a price for a service but not whether the service will even be available.
lumost 6y ago
This works if you don't care about churn, or necessarily moving a certain number of units/preserving capacity on a given day. As there are only 17 days until the theoretical peak delivery date there isn't much room to adjust. A miss-price on December 20th may cause you to sell out remaining capacity or worse favor one customer over others. A second price auction market for available capacity could allow the market to adapt fast and transparently to available capacity.

sokoloff 6y ago

High-volume shippers have contracts with carriers, often more than one year in length. Some of them are referenced to the retail rate. Many though are defined price (including surcharges) with annual escalations. Parcel carriers have been disrupted to some extent by Amazon building out their own logistics capability both line-haul and last-mile and have been signing contracts with non-Amazon shippers to ensure they could cover their costs and make a profit. Now, pandemic hits and drives a lot of unexpected, probably just this year, traffic into parcel shipping that would have otherwise been freight to stores and passenger car to homes and there's not enough capacity. There's not as much price shaping they can do without being in violation of their contract. In a lot of cases, they know they need these big shippers next year as well, so they can't entirely burn them this year even if they were willing to litigate the contract.

jessaustin 6y ago
It's an interesting contract, that locks in a price for a service but not whether the service will even be available.

lumost 6y ago

This works if you don't care about churn, or necessarily moving a certain number of units/preserving capacity on a given day. As there are only 17 days until the theoretical peak delivery date there isn't much room to adjust. A miss-price on December 20th may cause you to sell out remaining capacity or worse favor one customer over others. A second price auction market for available capacity could allow the market to adapt fast and transparently to available capacity.