The Price Strategy Study Of High-speed Railway Based On Demand Elasticity In China

In recent years, China has constructed and operated large-scale high-speed railway. During the operation of Chinese HSR, some problems came up. On the one hand, there are not enough passengers taking high-speed railway, so the high-speed railway couldn’t make full use of advantage that it can transport tremendous passengers than civil aviation or highway. On the other hand, since the operation, government has cancelled many existing railway lines, therefore passengers have to unwillingly choose HSR, which has aroused widespread social concern. This paper will research on the price of Chinese HSR and explore the suitable price strategy in the perspective of demand elasticity so as to increase the income and social welfare.This paper analyses the influencing factors of transportation demand and demand elasticity of HSR using the demand elasticity theory and transportation demand theory, then analyses the suitable price strategy using third-degree price discrimination theory. After the theory analysis, this paper gives a systemic analysis of Chinese HSR demand elasticity from three aspects, which are substitutability, necessities for passengers, budget expenditure proportion of transportation expense. Combined with the analysis of Chinese HSR demand elasticity, this paper uses the method of questionnaire to calculate the demand price elasticity, income elasticity and cross price elasticity of Beijing-Shanghai and Zhengzhou-xi’an.According to the result, Chinese HSR is elastic, so the HSR should be at a reduced price to maximize the revenue. The high HSR and civil aviation cross price elasticity means the high substitutability between HSR and civil aviation. Considering the flexible price of civil aviation, HSR should also implement various price strategy to cope with the competition from civil aviation. Due to the different demand price elasticity of different season, distance or people, or the different demand income elasticity of different seats or areas, when developing price strategy, the HSR enterprise should distinguish different seasons, distance, people, seats or areas, which can improve the HSR revenue.