<b>Estimation of Price Elasticity of Demand for Higher-class Car Travel on Commuter Trains</b>

Higher-class Car (seat upgrade) fares on local trains affect not only demand for higher-class travel, but also ordinary class demand on the same trains. It is therefore important to estimate the impact of price changes on the demand for Higher-class Cars, especially during weekdays' commuting time when overcrowding is at a high level. This research focuses on the two-stage pricing structure of Higher-class Car fares where prices jump by 210 JPY when the travel distance exceeds 50 km in the Tokyo area. Then, this research estimates the price elasticity using regression discontinuity design. The estimation results show that the elasticity is significantly larger than one, which means that the price sensitivity to demand is at a high level. Pricing decisions should be made carefully based on the estimation results of price elasticity and current overcrowding levels in Ordinary and Higher-class Cars.