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[quote user="schlimm"] [quote user="Sam1"]My argument is simple.  Don't offer discounts unless they cover the variable costs up front and ultimately all or most of the fixed costs.[/quote] In re the above, take a look sometime at Ken's (greyhound) reasoning on offering differential rates on the same route and distance on freight lines.   The airlines do the same.  Ditto with Megabus.   It is better to fill a seat or car at a bargain fare then to let it sit empty.   Some customers might object, but it is a sane practice in a deregulated market. [/quote] It is better to fill an empty seat if you can recover the variable cost of that seat and contribute something to the fixed costs. We don't know whether Amtrak's pricing models do that because we don't have access to them. We use discounts and incentive pricing in the competitive electric utility market in Texas. But we cover the variable costs.  They can change depending on time of day.  We try to get something for the fixed costs, but don't always do so, at least in the short run, for a variety of complex reasons. Southwest Airlines and Greyhound are based in Dallas. We worked closely with them to develop some of our costing models. They were way ahead of us in understanding and pricing in competitive markets.  I don't remember them ever saying that they did not attempt to recover their variable costs. The run empty seats rather than give them away. Sometimes it is better to fill the seat even if you cannot contribute anything to the fixed costs, providing you are knowingly selling it as a lost leader, and anticipate recovering it over time. But if one loses money filling an empty seat, it is an ineffective marketing and pricing strategy. Amtrak has lost money every year since its inception.  The NEC, assuming that it wears 80 per cent of the depreciation, which may be understated, loses as much per passenger mile as the long distance trains after allocations of its fixed costs.  A real business has to recover all of its costs. Not just the operating costs. Given Amtrak's dismal financial record, I would like to see the books before concluding that its Acela service is a good go and discounts contribute positively to its outcomes.
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