Skip to main content

Pricing Train Fares

Last week Alex commented about the high price of train fares for on the Northeast Corridor, compared to other Amtrak routes, even when accounting for distance. It’s often difficult to understand why things cost what they do, but I think it’s particularly difficult when it comes to train fares.

(from SP8254 - Catching Up on Flickr)

At the end of the day, the price of most goods and services in a market boils down to supply and demand. Even though the Northeast Corridor has a lot more service than other Amtrak routes, so long as the demand for that service outstrips the supply, fares will be higher. The fact that more service exists is one of the drivers of demand, as it makes the service significantly more useful to more people.

But there’s more. Unlike airlines or nonstop bus companies, trains don’t make “nonstop” runs between two markets. There are almost always stops in between, which creates an opportunity cost that must be accounted for.

Consider a hypothetical train traveling from DC to New York. It has 100 seats, and when it leaves DC, every seat has a passenger in it. Half of the passengers are going to New York, 30 are going to Philadelphia, and 20 are getting off in Baltimore. Of course, the people traveling to Baltimore expect to pay less than the people traveling to New York, because the distance they’re covering is a lot shorter. But every person traveling from DC to Baltimore represents one person who can’t travel from DC to New York.

Of course, this is a very simple example. In reality, there will be people who get on and off at different points along the line, and there are a lot more stops between DC and New York than the ones I mentioned. If Amtrak were truly seeking to maximize its revenue, it would price fares such that supply and demand were in check for every city-pair. This might mean that short trips would cost more than longer trips, or that there are quotas so that only a certain number of fares could be purchased between a given city pair – but doing that raises equity questions. Why should someone traveling a longer distance get to pay less? Why wouldn’t people just buy the least expensive ticket and get off the train early?

I can’t say with absolute certainty that this is the exact driver of train fares, and if anyone knows with more certainty, I’m very curious to know.


Popular posts from this blog

In Praise of Southwest's 'C' Boarding Group

A few weeks ago I saw a tweet from someone complaining that their Southwest Airlines boarding pass had been assigned A20 (meaning they would be at least one of the first twenty passengers to board the plane). Apparently this person though they should have been assigned a higher number, less their flight experience be considerably spoiled.

Despite the complaints, Southwest has resisted demands to assign seats on its flights, a decision which I personally applaud. I'll admit that I was skeptical when they rolled out the newest boarding procedure, assigning both boarding groups and a line number; but in hindsight it seems like one of the best operational decisions they've ever made. If nothing else, it effectively eliminated the infamous "cattle call" whereby fliers were getting to airports hours in advance and sitting in line on the floor as if they were waiting for the midnight showing of the new Star Wars movie.

When I was an intern at Southwest Airlines last winter, I…

So You Want to be a Southwest Airlines Intern?

My personal website must have pretty decent SEO - because in the past year, I've received about two dozen emails from aspiring Southwest Airlines interns looking to draw on my experience in search of their own dream internship. In the past two weeks alone a few new emails have already started rolling in...

(from flickr user San Diego Shooter)

If you've found your way here, you might be hoping for the silver bullet; a secret tip that will propel you above the competition. Unfortunately, I do not know any inside secrets. I can only share my experience as an internship candidate about two years ago and, rather than responding individually to future emails I anticipate to receive, I hope that potential interns will find the information posted here valuable.

Understand: Southwest Airlines is a very unique company. The corporate culture at Southwest is truly unlike that of nearly every other company. But you probably already knew that, since it now seems mandatory for every management,…

Mixing Sports and Business

In the last two days I've devoured every article in the Washington Post about the Nationals painful and epic defeat on Friday night in the NLDS. It was a tough way to see the season end, there's no doubt about that.

(from wallyg on Flickr)
These articles make it clear that there are a lot of people emotionally invested in professional sports. I think they sometimes they forget that, ultimately, Major League Baseball is big business. Each team is a major corporation and the league itself is an organization governed by a bunch of executives. The television networks that show the games are under contract with the team owners and the games aren't usually available to those without cable.

This is why it can be so hard to be a fan in this game. It's the multi-millionaire and billionaire owners that call most of the shots. They get to decide how much they're willing to spend on players. They get to decide who to hire as the CEO of the company. They get to decide how much t…