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Am I missing something to say that raising prices in the midst of a declining customer base seems backwards?

The Chicago public transportation system keeps reporting, every year or so, that not enough people are riding the buses and trains. So they "need to" raise prices. The post office complains that they need to raise the price of a first-class stamp, although it seems more and more people are paying bills online.

On the other hand, if you`re trying to sell a hat through a second-hand store, oftentimes raising the price gets more people interested.

So what`s the deal here?

I`m not all that happy about mailing off a check to pay a bill. I did it for years, then got into online payments. So where a book of stamps used to last me only a few months, now a single book lasts most of the year. I`m not buying a lot of stamps. Is that why the price is now going up?

Where I`d been toying with the idea of maybe electronic payments in certain areas, the price increase has convinced me to go that way and stop buying any booklets of stamps.

EBay seems bound and determined to keep raising their prices (to post an ad), while making it more and more difficult to make the ads look the way we want. Meanwhile, Google is working like crazy to make an integrated, affordable store system. Although we weren`t all THAT interested, the ever-rising eBay prices have finally convinced us to give it a shot.

Has anyone got a good explanation as to the reasoning behind this? Is there some sort of well-known business theory that dictates price increases in the face of a shrinking market or decreasing interest? I don`t get it.

Craig,

You brought up an interesting point, but what you are not getting is that the expectation of a decline over the course of 10 years. You know that the math experts are at work with the increases based on many different factors. Stamps are going to increase because companies and advertising companies are going to continue to use this as an avenue to reach new customers, and people still have to mail larger packages. The people taking the bus may decline over time the s-curve will meet the expectations of cost over time. The predictions is that the city and roads will become more congested making more people take the bus.

Shortsightedness

jillybeans

Gas prices are ridiculous which has to affect all transportation.

We may pay our bills online but businesses that ship through the Post Office are saving quite a bit with their flat rate boxes.  For the past couple years we haven`t had to pay for a single box because the Post Office gives them to you.  Guess that`s why they might charge us more for those stamps now!

There will always be people that ride buses and trains. Letters, magazines, ads etc can only be sent by mail.  And all my packages will only ship that way too! So, that`s why they can raise prices, because we`ll have to pay them anyway, unless we`re willing to find new ways of doing these things.

I would think that companies and organizations can get away with raising prices when they have a captive market. For instance in an effort to reduce energy consumption the EU, Australia and (I believe) NZ will phase out wasteful incandescent light bulbs by 2009. This now becomes a captive market, these people must buy the new type of bulbs, I would imagine that price increases will follow in short order.

The Post office, Ebay, oil companies have no competition to speak off, so they too have a captive market and can get away with that. For them you using their services is similar to changing the oil in your car, pay me now ten or pay me twenty later, but pay me you will.

Okay, so this "S-curve" was something I didn`t know about. That`s a good concept. Also, I agree that when a business "seems to" have no competition, they can raise prices at will. The long-term effect is to then create the competition, so that`s a good thing.

IBM decided that having a monopoly on PCs they could do whatever they wanted with prices and proprietary technology. That, in effect, created Compaq and almost drove IBM out of business. I`d suppose that when public transportation goes belly up, either the government will step in to subsidize it, or we`ll see an innovative new way to move people around.

We already subsidize public transportation at several levels thru taxes, national, state, local as well as user fees (fares, tolls).

A limited or monopolistic market allows for this type of behavior, economics 101. : )

Welcome to the American "Free Enterprise System".

:-) I wasn`t gonna get into a discussion of how subsidizing and price controls inevitably lead to higher prices. 

OK, I thought I was answering the original question. 

Actually, you are answering the question, as I ponder it. In fact, I probably fell into a trap I get upset about in other folks, trying for a simplistic answer to a complex problem.

So to the point, then: When prices go up as a result of a near-monopoly, can we say they were "raised?" To me, "raising prices" implies a controlling authority. "Rising prices" would imply that factors at work in the marketplace are causing those increases, not necessarily someone making a decision.