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Second-best Decision Making of Railway Operators: How to Fix Fares, Frequency and Vehicle Size

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  • Piet Rietveld
  • Stefan van Woudenberg

Abstract

Optimal strategies in railway networks call for a differentiated treatment of fares, frequencies, and vehicle sizes in various links. However, for several reasons, railway operators may apply uniform levels for these decision variables. In this paper the authors investigate the welfare losses implied by uniform setting of fares per km, frequencies, or vehicle sizes. This is done within the context of a model with uniform cost structures but where demand levels vary across segments of the network. They demonstrate that the largest welfare loss results when frequencies are made uniform across links. Their results suggest that where differentiated prices are important to address issues such as congestion and directional asymmetries in demand, differentiated supply in terms of vehicle size, and in particular frequencies, are the preferred ways of addressing demand variations on different segments in a network. © 2007 LSE and the University of Bath

Suggested Citation

  • Piet Rietveld & Stefan van Woudenberg, 2007. "Second-best Decision Making of Railway Operators: How to Fix Fares, Frequency and Vehicle Size," Journal of Transport Economics and Policy, University of Bath, vol. 41(3), pages 363-385, September.
  • Handle: RePEc:tpe:jtecpo:v:41:y:2007:i:3:p:363-385
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    References listed on IDEAS

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    1. Piet Rietveld & Roberto Roson, 2002. "Direction dependent prices in public transport: A good idea? The back haul pricing problem for a monopolistic public transport firm," Transportation, Springer, vol. 29(4), pages 397-417, November.
    2. Douglas W. Caves & Laurits R. Christensen & Joseph A. Swanson, 1980. "Productivity in U.S. Railroads, 1951-1974," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 166-181, Spring.
    3. Erik T. Verhoef & Jan Rouwendal, 2004. "Pricing, Capacity Choice, and Financing in Transportation Networks," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 405-435.
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    JEL classification:

    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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