Marginal Cost Calculations and Price Discrimination in the Railway Freight Sector

Abstract

It has been a long discussion in the field of transport economy whether the socially optimal marginal cost based prices should be a basis for price policy even in the railway freight forwarding services. The general advantages seem to confirm marginalists in their belief, while others draw the attention to the serious diseconomies of price setting equal to marginal costs. The paper summarises the main arguments from both sides, and tries to clarify some of the difficulties within the railway freight services. Since the `ordinary´ marginal cost does not seem to provide full cost coverage in the case of most railway companies, an outlook to the theory and to the practice of price discrimination, its possibilities within the transport sector might be of help. One of the most important outcomes is that a multi-theory price setting is needed to fulfil all requirements set, assessing both the good cost coverage and the social optimum. The text flow strongly depends on the great literature [4].