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Differential Pricing Strategies of High Speed Railway Based on Prospect Theory: An Empirical Study from China

Author

Listed:
  • Jin Qin

    (School of Traffic and Transportation Engineering, Central South University, Changsha 410075, China)

  • Wenxuan Qu

    (School of Traffic and Transportation Engineering, Central South University, Changsha 410075, China)

  • Xuanke Wu

    (School of Traffic and Transportation Engineering, Central South University, Changsha 410075, China)

  • Yijia Zeng

    (School of Traffic and Transportation Engineering, Central South University, Changsha 410075, China)

Abstract

Based on the single pricing method of the high-speed railway (HSR) in China, a pricing strategy without flexibility leads to the problem of extreme fluctuations in passenger flow and difficulty in increasing revenue. In order to achieve sustainable development of the HSR from the perspective of pricing, in this study, we divided the passenger market according to the different factors affecting passengers’ choice behavior, maximized ticket sales revenue with expected travel cost as the reference point, and used prospect theory to construct a differentiated pricing model under elastic demand. A simulated annealing algorithm was used to solve this model under two passenger flow intensities. Taking the Beijing–Shanghai corridor as an example for analysis, the results show that differential pricing can be implemented on the basis of passenger decision-making, and price reductions at off-peak periods will attract passenger flow which will increase ticket sales revenue by 10.41%. During the peak period, prices can be increased to maintain passenger flow, and ticket sales revenue will increase by 7.98%. We also found that increasing passenger expectations have a greater impact on ticket sales. This study provides theoretical and methodological support for the sustainable development of the HSR.

Suggested Citation

  • Jin Qin & Wenxuan Qu & Xuanke Wu & Yijia Zeng, 2019. "Differential Pricing Strategies of High Speed Railway Based on Prospect Theory: An Empirical Study from China," Sustainability, MDPI, vol. 11(14), pages 1-17, July.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:14:p:3804-:d:247479
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    2. Yu Wang & Xinghua Shan & Hongye Wang & Junfeng Zhang & Xiaoyan Lv & Jinfei Wu, 2022. "Ticket Allocation Optimization of Fuxing Train Based on Overcrowding Control: An Empirical Study from China," Sustainability, MDPI, vol. 14(12), pages 1-12, June.
    3. Wenliang Zhou & Xiang Li & Xin Shi, 2023. "Joint Optimization of Time-Dependent Line Planning and Differential Pricing with Passenger Train Choice in High-Speed Railway Networks," Mathematics, MDPI, vol. 11(6), pages 1-28, March.
    4. Zhan, Shuguang & Wong, S.C. & Lo, S.M., 2020. "Social equity-based timetabling and ticket pricing for high-speed railways," Transportation Research Part A: Policy and Practice, Elsevier, vol. 137(C), pages 165-186.
    5. Wenliang Zhou & Ziyu Zou & Naijie Chai & Guangming Xu, 2023. "Optimization of Differential Pricing and Seat Allocation in High-Speed Railways for Multi-Class Demands: A Chinese Case Study," Mathematics, MDPI, vol. 11(6), pages 1-17, March.
    6. Yingliang Zhou & Qiwei Jiang & Jin Qin, 2019. "Pre-Disaster Retrofit Decisions for Sustainable Transportation Systems in Urban Areas," Sustainability, MDPI, vol. 11(15), pages 1-18, July.
    7. James Kaizuka, 2021. "Even Electric Trains Use Coal: Fixed and Relative Costs, Hidden Factors and Income Inequality in HSR Projects with Reference to Vietnam’s North–South Express Railway," Sustainability, MDPI, vol. 13(24), pages 1-29, December.
    8. Xueyi Guan & Jin Qin & Chenghui Mao & Wenliang Zhou, 2023. "A Literature Review of Railway Pricing Based on Revenue Management," Mathematics, MDPI, vol. 11(4), pages 1-17, February.
    9. Jin Qin & Yijia Zeng & Xia Yang & Yuxin He & Xuanke Wu & Wenxuan Qu, 2019. "Time-Dependent Pricing for High-Speed Railway in China Based on Revenue Management," Sustainability, MDPI, vol. 11(16), pages 1-18, August.

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