Differential Pricing in the Rail Industry

Differential pricing — charging relatively higher rates to customers who have fewer competitive options than to customers with more competitive options — is the most economically efficient way for railroads to cover their costs. It allows railroads to balance the desire of each customer to pay the lowest possible rate with the requirement that the overall network earn enough to pay for all the things needed to keep it functioning now and in the future. Railroads’ use of differential pricing, with balanced regulatory protections against excessive rates, is essential if America is to have a viable, privately owned, and privately funded national freight rail system.

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