An Economic Analysis of Ramsey Pricing in Pool Train Fares

Abstract

Given the case that trains are operated over a track owned by two railway companies, the common fare in which they share a single break-even constraint, the common fare in which they have its own break-even constraint, an added-up fare, and a fare by the merged company are considered from the view point of Ramsey pricing. It is shown in qualitative analyses and numerical examples that the common fare is likely to be superior to the adding-up fare in terms of social net benefits. It is also shown that Ramsey rules are applicable in branch lines operated by each company.