Markets for transport are often characterized by unequal demand in both directions: during peak hour in the morning trains are crowded into the direction of large cities, whereas they may be almost empty into the other direction. A similar pattern often exists for freight flows. In this paper the implications of these imbalances for price setting of transport firms are discussed. From the economic theory viewpoint, two regimes can be distinguished: one regime where, owing to price differentiation, the flows are equal; and the other one where unequal flows are the result. Special attention is paid to the case the transport firm does not apply price discrimination as is the case in most railway firms in Europe. Such a policy causes a reduction in profits. (A)
Abstract