If the HSR charges based on marginal cost, and marginal and average cost are significantly different, then this could be a problem. I intuitively assumed they’d be fairly close. Thinking about it more, I’ve heard that airports charge vastly more for people who are flying for business than for pleasure, which suggests there is a significant difference.
Marginal and average cost are obviously different, but your example of business fliers is not relevant. Business fliers aren’t paying for their flights, but do often get to choose which airline they take. If there is one population that pays for their own flights and another population that does not even consider cost, it would be silly not to discriminate whatever the relation between marginal and average cost.
The businesses are perfectly capable of choosing not to pay for their employees flights. The fact that they do, and that they don’t consider the costs, shows that their willingness to pay is much higher than the marginal cost. If it wasn’t for price discrimination, consumer surplus would be high, and a large amount of value produced by the airlines would go towards the consumers.
Are high-speed trains natural monopolies? That is, are the capital costs (e.g. rail lines) much higher than the marginal costs (e.g. train cars)? I think they are, and if they are considering the consumer surplus is important, but if they’re not, then it doesn’t matter.
The fact that they do, and that they don’t consider the costs, shows that their willingness to pay is much higher than the marginal cost.
What marginal cost are you referring to here? If it’s the cost to the airline of one butt-in-seat, we know it’s less than one fare because the airline is willing to sell that ticket. And this has nothing to do with average cost. I think you’ve lost the thread a bit.
What I mean is that, if everyone payed what people who travel for pleasure pay, then people travelling for business would pay much less than they’re willing to, so the amount of value airports produce would be a lot less than what they’d get. If they charged everyone the same, either it would get so expensive that people would only travel for business, even though it’s worth while for people to travel for pleasure, or it would be cheap enough that people travelling for business would fly for a fraction of what they’re willing to pay. Either way, airports that are worth building would go unbuilt since the airport wouldn’t actually be able to make enough money to build it.
Marginal and average cost are obviously different, but your example of business fliers is not relevant. Business fliers aren’t paying for their flights, but do often get to choose which airline they take. If there is one population that pays for their own flights and another population that does not even consider cost, it would be silly not to discriminate whatever the relation between marginal and average cost.
The businesses are perfectly capable of choosing not to pay for their employees flights. The fact that they do, and that they don’t consider the costs, shows that their willingness to pay is much higher than the marginal cost. If it wasn’t for price discrimination, consumer surplus would be high, and a large amount of value produced by the airlines would go towards the consumers.
Are high-speed trains natural monopolies? That is, are the capital costs (e.g. rail lines) much higher than the marginal costs (e.g. train cars)? I think they are, and if they are considering the consumer surplus is important, but if they’re not, then it doesn’t matter.
What marginal cost are you referring to here? If it’s the cost to the airline of one butt-in-seat, we know it’s less than one fare because the airline is willing to sell that ticket. And this has nothing to do with average cost. I think you’ve lost the thread a bit.
What I mean is that, if everyone payed what people who travel for pleasure pay, then people travelling for business would pay much less than they’re willing to, so the amount of value airports produce would be a lot less than what they’d get. If they charged everyone the same, either it would get so expensive that people would only travel for business, even though it’s worth while for people to travel for pleasure, or it would be cheap enough that people travelling for business would fly for a fraction of what they’re willing to pay. Either way, airports that are worth building would go unbuilt since the airport wouldn’t actually be able to make enough money to build it.