A Handbook of Transport Economics
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A Handbook of Transport Economics

Edited by André de Palma, Robin Lindsey, Emile Quinet and Roger Vickerman

Bringing together insights and perspectives from close to 70 of the world’s leading experts in the field, this timely Handbook provides an up-to-date guide to the most recent and state-of-the-art advances in transport economics. The comprehensive coverage includes topics such as the relationship between transport and the spatial economy, recent advances in travel demand analysis, the external costs of transport, investment appraisal, pricing, equity issues, competition and regulation, the role of public–private partnerships and the development of policy in local bus services, rail, air and maritime transport.
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Chapter 22: Price Discrimination

Simon P. Anderson and Régis Renault


Simon P. Anderson and Régis Renault INTRODUCTION Whenever we take a trip by train or by plane, we are often well aware that the price we paid was quite different from that paid by our fellow passengers with whom we are sharing the carriage or cabin. We can bemoan this situation, if we booked late and do not qualify for an age discount and our ticket was one of the more expensive ones or perhaps be pleased at having gotten a good price. The different prices are illustrations of what economists call discriminatory pricing. This seems to be a textbook case where a service which is identical (same journey, same date, same time, same comfort class) is sold at different prices.1 Looking closer, it is a little oversimplified to claim that all travelers have actually received the same level of service. Less expensive tickets are often associated with numerous restrictions which clearly indicate a lower level of service. It is often necessary to buy the ticket a long time in advance, with restrictive conditions on cancellation and reimbursement. The traveler can then enjoy the same service as she would have had if she had paid full price – unless, of course, her plans change at the last minute. However, to get the cheap fare she has to accept some risk, had she been obliged to change or cancel her ticket, or indeed she might have had to put up with some inconvenience due to having not changed her ticket in...

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