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This paper describes the results of research project on optimal pricing forLLC "Perm Local Rail Company". In this study we propose a regression tree basedapproach for estimation of demand function for local rail tickets consideringhigh degree of demand heterogeneity by various trip directions and the goals oftravel. Employing detailed data on ticket sales for 5 years we estimate theparameters of demand function and reveal the significant variation in priceelasticity of demand. While in average the demand is elastic by price, near aquarter of trips is characterized by weakly elastic demand. Lower elasticity ofdemand is correlated with lower degree of competition with other transport andinflexible frequency of travel.

Heterogeneity in demand and optimal price conditioning for local rail transport