As a graduate from one of the world’s finest universities, you have been hired
as a consultant by the West Japan Railway Company (JR West) to write a
report on its pricing strategy on its Shinkansen high-speed rail service
between Tokyo and Osaka. The requirements of the report are given below,
but your report should address each specific question in turn. For the
purposes of your paper, you can assume that JR West is a monopolist in the
1. Outline the pricing strategy you recommend when JR West knows the
exact willingness to pay for the train trip between Tokyo and Osaka for
each customer. What conditions are required for this pricing strategy to be
implementable? Make sure you provide clear economic reasoning for your
2. Now assume that there are just two types of customer – business
travellers and holiday makers, and that the two types of consumer differ in
their valuation for the train trip. Assume, for the purposes of the question,
that the business travellers are the high-value customers, and leisure
travellers have a relatively low value for the journey. While JR West knows
the willingness to pay for each type of consumer, it cannot observe the
type of any given traveller (that is, JR West does not know whether a
particular potential traveller is a business or leisure customer). What
pricing strategy would you now recommend? What conditions are required
for your recommendation to be implemented? Provide intuition for your
3. JR West is also interested in its pricing options for another potential
scenario. As it happens, leisure travellers actually want to go to Kyoto, not
Osaka itself. (Note that the Shinkansen trainline runs through Kyoto on its
way to Osaka, and that Kyoto is relatively close to Osaka.) Business
travellers, on the other hand, want to go to Osaka, but they could catch the
train to Kyoto if they have to (and then make their way onto Osaka on local
services). Moreover, the value to business travellers is more for both a
train trip to Kyoto and to Osaka than it is for a leisure traveller.
Given this new scenario, what pricing strategy options are available to JR
West? What do you suggest JR West does to help raise its prices? Make sure
you provide economic arguments to justify your answer.
1. This essay is at most 700 words long, not including references,
appendices and diagrams. Any essays longer than 700 words will only be
read and graded up for the first 700 words.
2. Please submit your assignment via Tutnitin.
3. Apply the relevant theories from the unit of study to analyse the problem
4. In this assignment, you will also be rewarded for the depth of your
analysis using the tools that you will have been taught in the unit.
5. Make sure you reference your essay completely, consistently and
accurately. Any standard referencing style is acceptable.