Abstract
Germany’s state-owned train operator Deutsche Bahn made a credible pledge to completely pass through a VAT reduction to passengers. Using a price observation dataset, we find that pass-through rates for fixed-price tickets are indeed 100%, whereas pass-through rates for tickets with revenue-management-based prices can differ significantly from 100%. They vary over purchase-timing periods, departure weekdays, departure timeframes, and price levels, thereby indicating that revenue management systems can cause unequal pass-through to different customer groups. We also provide theoretical insights into the price-setting considerations of offering these two ticket types, and derive the monopoly pass-through rate for ad valorem taxes. • A VAT reduction in Germany’s long-distance passenger rail market is analyzed. • Germany’s largest railway company wants to completely pass through the reduction. • Pass-through for fixed-price tickets is 100%. • Pass-through for tickets based on revenue management (RM) can differ from 100%. • RM systems appear to cause unequal pass-through to different customer groups.
Published Version
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