Essay: Pricing Strategies of UK Rail

Sample Essay

The other strategy that has been identified as being used by UK Rail is peak and off peak time based price discrimination. Under this type of price discrimination, the UK Rail has set peak and off peak times for travel on the trains. Any customers who use the trains during peak times are liable to pay a different peak time travel fare which is much higher than the average fare for non peak timing. The peak times for travel on the UK Rail are from 7.30am to 9.30am in the 5.00pm to 7.30pm in the evenings. During these times a higher fare is charged to the customers availing UK rail services, while those who travel on off peak times are charged lower fares. This is possible as during the off peak times there is excess capacity and therefore the marginal costs for the service provision are reduced as the supply is elastic as opposed to inelastic supply during peak times (Farham, 2005).

As a result UK Rail is able to charge lower fares for off peak travel. Geraldin and Petit (2007) in their research article highlighted that price discrimination is rampant in the transportation industry, especially when it comes to the train fares. The most common strategy for discrimination pricing that is employed in this industry is for the peak and off peak timings whereby consumers are allowed lower rates at off peak times to encouraged them to travel on the trains as its possible that the masses might not be able to travel on the average set rates for train travel. The lower marginal cost during the off peak timings allows the train transportation providers to charge a much lower fare for their services while still be profitable.

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