Cable cars: From optimal design to optimal pricing

Although cable car services have become an integral part of the transit system in many cities in the world, their specific technology has never been studied from the viewpoint of the links between optimal design and marginal cost pricing. Here we formulate, solve and apply a first model to represent the specific features of a cable car system considering operators' and users' costs. The links among cabins' density, their speed and capacity, frequency, slope, and others, are formulated to obtain the optimal design variables as a function of demand volume, a system cost function, marginal and average costs, and first best money prices and possible subsidies. An application with sensitivity analysis illustrates the model.