Abstract: Fashionable Pricing Systems for Railroad Services in Europe in the 1880s
The aim of this paper is to compare different pricing systems used in Europe, from the French classification system to the fashionable Alsace system, also called the natural system. Pricing rail services was a very complex problem that deserved to be solved with a scientific approach and checked against empirical observations. In comparing fashionable pricing systems for rail services in Europe, this paper advances the thesis that public works, engineers, and railway managers were the pivots for the establishment of the theory of the firm, because companies were not approaching the question by trial and error, but were using analytical reasoning for heuristic purposes. European pricing systems were responding to profit maximization for market optimality, subject to government regulation and legal rail tariffs that reflected political concern with social-maximizing-welfare optimality.