Suboptimal pricing model and analysis of high-speed railway

Abstract

At present, the pricing strategy of Chinese High-Speed Rail (CHSR) mainly depends on the construction cost as well as the operating cost. The overpriced fare, which does not reflect passenger demand, leads to loss of both business income and social benefits. In this paper, we use the analogy method and perform statistical analysis on questionnaire data with SPSS, thus to study CHSR's suboptimal pricing in terms of corporate profit and social welfare. We establish a discriminate Ramsey suboptimal pricing model based on operation cost, which reflects the cost features of CHSR preferably. The model shows that Ramsey price index varies with different seat classes, implying a strict correspondence between price and cost. Breakeven can be achieved independently with price discrimination avoided. Under the condition that total social welfare is greater than zero, Ramsey price index takes value in a wider range than general results. Our work also contributes to directing practice in CHSR's pricing.