Uniform Delivered Pricing is Essentially Freight Absorption Pricing: Theoretical Model with Simulation

The uniform delivered price is the price contains mill price and transportation cost. Although the firms bear the transportation cost, practically the firms would pass all or part of transportation cost through to consumers. The research finds that, as the demand curve slopes downward or there exists competitors or potential competitors, the U.D.P. firms neither can pass all of transportation cost through to consumers, and nor bear all of it. Furthermore, the Löschian firms are able to pass larger portion of transportation cost through to consumers than the Hotelling-Smithies competition firms do. Therefore, the U.D.P. is essentially Freight Absorption Pricing which is another spatial pricing policy used by the firms.