NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Ski-Lift Pricing, with an Application to the Labor Market

Robert J. Barro, Paul M. Romer

NBER Working Paper No. 1985 (Also Reprint No. r1104)
Issued in February 1989
NBER Program(s):   EFG

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.

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Published: "Ski-Lift Pricing, with Applications to Labor and Other Markets." From The American Economic Review, Vol. 77, No. 5, pp. 875-890, (December 1987).

 
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