ABSTRACT
This chapter relates to the pricing of one or more products of given quality produced by a public enterprise. Quality itself is a variable, however, which raises additional questions. It proceeds as if there were no problem in distinguishing higher from lower quality. This is, of course, not generally true, but happens to be so in the case of many public enterprises. The effect on costs is readily calculable, but the effect on willingness to pay is not. Whereas the benefit of an extra unit of quantity is simply measured by the price for which the product is currently being sold, an extra ‘unit of quality’ raises the price which existing consumers will be willing to pay for the quantity currently being sold. Time saved or lost may be an aspect of quality change in the output of other public enterprises as well as those concerned with transport, so that this approach to the quality problem can be applied elsewhere.
