# Fundamentals of economics and cost of services

#### dmclean62

##### Mongoose
I was thinking about the "Check our numbers" post for passenger fares and it occurred to me that we can't check the numbers if we don't have the underlying cost assumptions.

For any given transportation service, if there was a standard ship design that did nothing but fulfill that one service with great efficiency, then whatever the ALL IN COSTS would be, that represents the minimum possible price for that service.

All in costs would start with the cost of the ship - what does it cost to operate a ship for a year? How many trips can it make in one year? There's always going to be some time overhead in addition to annual maintenance. What is the depreciation on the ship over a year? (probably the same as if you had a loan for 100% of the ship price?) Don't forget maintenance, crew salaries, and insurance.

For each trip, what are the costs of that trip? Don't forget docking fees, fuel costs, any overhead associated with the service (cargo handlers to load and/or unload, bank transaction fees, fees to agencies lining up cargo or passengers).

Then, figure in "occupancy rate" (or whatever it would be called for cargo) because it won't always be possible to completely fill the ship. There might be "stand by" cargo/passengers at a reduced rate, but that can't be counted on.

Then add in some profit - at least 5%, maybe more.

The reality is that supply and demand will determine what the final cost is, but nobody would offer a service at a loss, so running these calculations would tell you if the price assumptions being used are in any way reasonable. If the prices listed are much higher than these costs show, mega-corporations will invest in providing the service, drive down costs, and competition will ensure. Lower costs will mean that more people will use the service, but only up to a point. You'd have to do some kind of economic model to determine what the demand would be at a given price point.

#### Condottiere

##### Emperor Mongoose
First you have to figure out demand, and the extent of it.

Or create it.

#### Geir

##### Cosmic Mongoose
I did try to explain what I did to come up with the numbers in the previous post.

It does make assumptions that include fuel costs, maintenance, salaries, stewards and the like. I didn't include berthing costs, as they can be very variable, but the goal was to ensure that at least with a full load, ships can make a minimal profit even with a full mortgage to pay, that it's advantageous to carry high passengers over middle over basic, and that there is a higher premium for longer jump vessels, as these will be rarer than short haul ship and therefore able to charge more. Not saying that the results are scientific or completely optimized - since one of the goals was to use round numbers, but at least plausible and workable for common ship types like the Class A, A2, and subsidized liner. It doesn't include things like insurance, which might be preferable, but its outside the scope of what's covered in the costs presented in the core book. Nor does it cover repairs, which are the scope of events, adventures, and decisions made by the Travellers.

I can send you a copy of the spreadsheet if you like, but it's not exactly annotated with descriptions and assumptions.

#### ShawnDriscoll

##### Cosmic Mongoose
Traveller is not a simulator.
Traveller emulates a setting.

#### PsiTraveller

##### Cosmic Mongoose
GURPS Far Trader has a lot of excellent economic modelling.

Page 92 of the Core Book has a section on Standards of Living and pricing. The pricing for docking is in the books as well, and salaries are in Highguard. maintenance costs and mortgage and life support costs can all be put into a spreadsheet.

The economics of ships is pretty bad and consistently lose money, unless you engage in Spec trade with a Broker of reasonable skill. At that point you can buy planets in a couple of years. Seriously, you can make ridiculous amounts of money by picking specific planets to get the high end trade goods. Radioactives, Pharmaceuticals, Uncommon Raw Material, Advanced Vehicles, Robots. A few tons of those and your mortgage is covered.

Skewing demand for travel is TAS, which hands out High Passage Credit vouchers every couple of months to members. That's 8500 credits every 2 months. These can be sold to other people, so there is probably a nice market for vouchers.

A ship employee costs 2000 in life support each month, 1000 for a stateroom, and 1000 for a person staying in it. Plus their salary. So the Mechanic making 1000 credits a month costs 3000 total a month to the ship. So the costs add up.

#### Condottiere

##### Emperor Mongoose
We know that costs and standards of living vary by geographical region, even by city district, let alone star system.

Most star systems are going to try to be self sufficient in essential goods, and may try to find loopholes to try and erect trade barriers to protect their domestic industries, assuming a hegemonic interstellar polity has a galactivization trade policy.

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