Markets for transport are often characterized by unequal demand in both directions: everymoming during peak hour the trams are crowded while moving into the direction of the largecities, whereas they may be almost empty into the other direction. A similar pattem oftenexists for freight flows. For example, from the large sea ports in Europe one observes largefreight flows (measured in terms of tons) into the hinterland, whereas the flows in theopposite direction are often smaller. In the present paper we discuss the implications of these imbalances for price setting of transport fims. From the viewpoint of economie theory , two regimes can be distinguished: one where -owing to price differentiation- the flows are equal, and one where unequalflows are the result. Special attention is paid to the case where the transport firm does not apply price differentiation, as is the case in mostrailway firms in Europe. We find that in the case of substantial tost interdependences the introduction of price differentiation does not only lead toan increase in profits, but that also the effect on consumer surplus may well be positive. This result differs from the standard result in theliterature on industrial economics which says that price differentiation has a negative impact on welfare of the average consumer that dominates thepositive effect on profits.
|Place of Publication||Amsterdam|
|Publisher||Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam|
|Publication status||Published - 1998|
Rietveld, P. (1998). Tariefdifferentiatie naar richting? : prijszetting op onevenwichtige retourmarkten in het vervoer. (Research Memorandum; No. 1998-54). Amsterdam: Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam.