Welfare loss of pricing schemes in commuting train and interregional train operations

Abstract

As metropolitan areas expand, commuter rail increasingly extends outward, creating unintended competition with interregional rail. Competition between commuter train service and interregional train service engenders an inefficient allocation of rail services, thereby inducing welfare losses. Hence, the imperative arises to stratify train classes clearly via rail fare adjustments. However, the public nature of rail services acts as a price ceiling, making it challenging to implement rail service fare increases, thus necessitating a solution capable of distinguishing between train classes with minimal fare adjustments. This study employs a Stated Preference (SP) survey targeting rail users traversing the Seoul-Suwon and Seoul-Cheonan segments of the Gyeongbu Line in Korea to elucidate remedies for enhancing the inefficiency prevalent in the rail pricing schemes. Distinct preference clusters for each rail service and the value of time and seat reservation service for rail users were preliminarily discerned by leveraging the SP survey. The proposed solution advocates for an increase in interregional rail service fares of $0.52 for the Seoul-Suwon section and $3.14 for the Seoul-Cheonan section, along with a restriction in seat reservation services, to achieve differentiation between train classes. Implementation of this solution is anticipated to recalibrate the mode share within the rail services, fostering efficiency in service allocation and bolstering the profitability of rail operators, thereby mitigating welfare losses. This study contributes to rail pricing and efficiency of railway operations through SP analysis of rail transportation.