Joint Decision Model of Group Ticket Booking Limits and Individual Passenger Dynamic Pricing for the High-Speed Railway

Abstract

Rail operators in many countries discount group tickets to improve revenue by increasing price-driven demand. For individual passengers, dynamic pricing is beneficial for maximizing revenue based on the price discrimination principle. Usually, group fares are cheaper than individual fares. If too many group tickets are sold, there will not be enough tickets available to meet high-priced individual demand; by contrast, if not enough group tickets are sold and there is insufficient individual demand, the unsold seats will not have value once the train departs. Therefore, for railway operators, it is worth looking for a balance between group discounts and dynamic pricing to maximize benefits. Essentially, rail operators need to find the symmetry point of the expected revenue between accepting group bookings and reserving tickets for individuals when making decisions. In this study, we formulated a joint decision model of group ticket booking control and dynamic pricing and investigated the effect of the joint decision. The results of numerical experiments showed that incorporating group discounts into dynamic pricing can improve expected revenue when passenger demand is weak, and compared to setting fixed quantities for group tickets, dynamically controlling the limit of group bookings can effectively increase expected revenue. Further analysis of the impacts of time, number of tickets sold, and group demand was helpful to implement the proposed joint policy.