Monopoly abuse on the tracks?
Passenger groups have reacted angrily to the raising of off-peak fares by South West Trains by around 20% on many journeys. The train company has increased unregulated fares significantly where there is little competition, but appears to have limited the increases on journeys where there is competition. Is this an abuse of their monopoly position?
Train firm accused of abusing monopoly Times Online (8/5/07)
Price hike angers train watchdog BBC News Online (8/5/07)
Questions |
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| 1. | Discuss the extent to which South West Trains has a monopoly on its rail journeys. |
| 2. | Using diagrams as appropriate, show the reasons why South West Trains has chosen to increase off-peak prices by as much as 20%. |
| 3. | Discuss the likely value of the price elasticity of demand for off-peak rail journeys. To what extent will this have influenced South West Trains’ pricing decision? |