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

Abstract

As metropolitan areas expand, commuter railways increasingly extend outwards, creating unintended competition with interregional rail. Competition between commuter and interregional train services engenders an inefficient allocation of rail services, thereby inducing welfare losses. Hence, it is imperative to stratify train classes clearly by rail fare adjustments. However, the public nature of rail services acts as a price ceiling, making it challenging to implement rail fare increases, thus necessitating a solution capable of distinguishing between train classes with minimal fare adjustments. A stated preference survey (SPS) targeting rail users traversing the Seoul–Suwon and Seoul–Cheonan segments of the Gyeongbu line in Korea was used 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 SPS. To achieve differentiation between train classes, an increase in interregional rail fares of US$0.52 for the Seoul–Suwon section and US$3.14 for the Seoul–Cheonan section, along with a restriction in seat reservation services is advocated. 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.