Nonlinear Pricing of Transportation Based on Consumer Heterogeneity for Passenger-Dedicated Lines

Nonlinear pricing originates from consumer heterogeneity. It can achieve Pareto improvement, and to some extents it can avoid fairness disputes of price discrimination. The authors apply a consumer-parameter model on explaining the use of the non-linear pricing theory in the intercity passenger-dedicated line (PDL). The research shows that the success of using nonlinear pricing in PDL lies in designing prices in accordance with incremental market. Lower prices may reduce enterprise revenue, but also stimulate customer's consumption. Nonlinear pricing can restrain the lower price in incremental market brought by low prices, and thus the original market would not be damaged, finally Pareto improvement can be achieved.