A railroad operator utilizes a fleet of 2,000 freight cars for service to a particular group of shippers,
who produce grain. At present, train schedules are poorly coordinated. Because service is
unreliable, shippers take an excessive amount of time to load and unload the cars, with the result
that an average car delivers n=10 carloads per year (that is, the cycle time is tc=365/10=36.5 days).
At present shippers are charged p=$1,200 per load, and the operating costs are a =$1,100 per load.
The railroad operator is considering three options: (A) increase rates; (B) improve schedule
coordination and other aspects of operation so that service is more reliable, delivery times are
shortened and shippers load and unload cars more quickly; or (C) do both of the above. The
marketing staff has come up with the following approximate demand function showing the effect on
total carloads per year (V) of a change in rates, in cycle time, or in both:
A railroad operator utilizes a fleet of 2,000 freight cars for service to a particular group of shippers,who produce grain. At present, train schedules are poorly coordinated. Because service isunreliable, shippers take an excessive amount of time to load and unload the cars, with the resultthat an average car delivers n=10 carloads per year (that is, the cycle time is tc=365/10=36.5 days).At present shippers are charged p=$1,200 per load, and the operating costs are a =$1,100 per load.The railroad operator is considering three options: (A) increase rates; (B) improve schedulecoordination and other aspects of operation so that service is more reliable, delivery times areshortened and shippers load and unload cars more quickly; or (C) do both of the above. Themarketing staff has come up with the following approximate demand function showing the effect ontotal carloads per year (V) of a change in rates, in cycle time, or in both:
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