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High-speed rail pricing: Implications for social welfare

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  • Jiang, Changmin
  • Wang, Chunan

Abstract

This paper studies the competition between air transport and high-speed rail (HSR) when HSR adopts fixed pricing, and investigates the welfare effect of a reform to change HSR price from fixed to variable. We find that, first, due to the demand-side network effect, HSR traffic may increase with the fixed price. Furthermore, when the HSR operator is a social welfare maximizing monopoly, consistent with general industrial organization theory, social welfare will always increase if HSR moves from fixed price to variable price. However, when the HSR operator maximizes its profit or a weighted sum of profit and social welfare, or when the HSR operator and the airline compete, because of the interaction between the air and HSR services and the horizontal product differentiation of HSR services, social welfare may be greater under the fixed price if that fixed price is sufficiently low.

Suggested Citation

  • Jiang, Changmin & Wang, Chunan, 2021. "High-speed rail pricing: Implications for social welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:transe:v:155:y:2021:i:c:s1366554521002465
    DOI: 10.1016/j.tre.2021.102484
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    Cited by:

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    3. Bugalia, Nikhil & Maemura, Yu & Dasari, Rohit & Patidar, Manoj, 2023. "A system dynamics model for effective management strategies of High-Speed Railway (HSR) projects involving private sector participation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 175(C).
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