2 ms·

I think the time value of money is just totally upside down, and the train pass pricing is a good example of it. Nagoya needs to change their pricing to reflect

by ojbyrne 17y ago

I think the time value of money is just totally upside down, and the train pass pricing is a good example of it. Nagoya needs to change their pricing to reflect that, because they're leaving money on the table by charging so much less for a six-month pass vs. one month passes. Chances are the money they get paid up front can't be invested in a short-term asset with a return that justifies the discount. Governments move slow, and leave money behind them.

patio11 17y ago
JR (East and West) are both publicly traded corporations. I sympathize with "governments are inefficient by nature", but I think you're a wee bit off the mark here. I say "a wee bit" because Japan Railways was once owned by the state, and at certain industries and certain sizes in Japan it is difficult to tell where the government stops and the companies start, and vice versa. This phenomenon isn't unique to Japan -- c.f. "military industrial complex" or the security arrangements at airports. Anyhow, both of the JRs are solid constituents of what used to be called Japan, Inc. (A derisive name in the late-80s which fell out of favor after denationalization and, probably more importantly, after Japan's economic woes caused it to drop off the radar screen of threats to American economic preeminence.)
gaius 17y ago
It's not that they can invest the money, but that they've certainty over the money, and can plan with it, whereas they can't assume that a buyer of a one-month pass will buy another one-month pass next month.
drusenko 17y ago
Not sure if this is what you meant or not, but while some of the discount comes from the TVM side of things, I'd venture to guess a much larger source of the discount comes from the fact that they have locked you in to a 6 month pass. If you picture the monthly pass as a monthly subscription, then think of a reasonable retention rate for this situation (something less than 100% month-over-month), the value of guaranteeing 6 purchases up front starts to become significant.
- ojbyrne 17y ago
  Locking you into a pass for six months means they don't have to have as much cash on hand to deal with uncertainty. So they can invest additional cash in securities with 6 month terms.

by ojbyrne 17y ago

patio11 17y ago

JR (East and West) are both publicly traded corporations. I sympathize with "governments are inefficient by nature", but I think you're a wee bit off the mark here. I say "a wee bit" because Japan Railways was once owned by the state, and at certain industries and certain sizes in Japan it is difficult to tell where the government stops and the companies start, and vice versa. This phenomenon isn't unique to Japan -- c.f. "military industrial complex" or the security arrangements at airports. Anyhow, both of the JRs are solid constituents of what used to be called Japan, Inc. (A derisive name in the late-80s which fell out of favor after denationalization and, probably more importantly, after Japan's economic woes caused it to drop off the radar screen of threats to American economic preeminence.)

gaius 17y ago

It's not that they can invest the money, but that they've certainty over the money, and can plan with it, whereas they can't assume that a buyer of a one-month pass will buy another one-month pass next month.

drusenko 17y ago

Not sure if this is what you meant or not, but while some of the discount comes from the TVM side of things, I'd venture to guess a much larger source of the discount comes from the fact that they have locked you in to a 6 month pass. If you picture the monthly pass as a monthly subscription, then think of a reasonable retention rate for this situation (something less than 100% month-over-month), the value of guaranteeing 6 purchases up front starts to become significant.

ojbyrne 17y ago
Locking you into a pass for six months means they don't have to have as much cash on hand to deal with uncertainty. So they can invest additional cash in securities with 6 month terms.