Methodological Principles of Formation of Tariffs for Railway

Abstract

Aim: Aim of this paper is to research the approaches that affect the efficiency of government regulation of tariff for railway transportation industry in both sectors in scientific and methodological way. Study Design: The study uses an Exploratory Design. Place and Duration of Study: Ukraine, between the periods 2015 to 2016. Methodology: Employed was the Narrative Textual Case Study (NTCS) method, while non-probability and convenience sampling technique was used to select the sample size. Results: The study found that in the current economic conditions the implementation of administrative regulatory infrastructure component makes use of unilateral restriction that allows the cost recovery fees for services infrastructure and determine the volume of necessary financial support in case of unprofitable rates. Regarding the operational component, the creation of tariff conditions for competition requires bilateral limit, which allows to determine the economically justified the lower and upper boundaries within which the price depending on the factors set fees sphere of operation. This approach to pricing regulation in potentially competitive sector allows carriers to limit the boundaries of flexibility to respond to changing conditions of transport markets, consider the price elasticity of demand, positive trends in the use of the laws of the market economy. Sharing unilateral restrictions to justify the fees for services natural monopoly and bilateral - in potentially competitive services sector is a competitive motivational method of pricing, which meet the requirements of effective functioning of natural monopolies in the market environment, and provides irreversible monopolization of potentially competitive  sectors. Conclusion: Motivating the price competitive regulation will establish market-oriented competitive tariffs for freight and passenger transportations, and also promote creation of conditions for adaptation of railway transport to enhance competition in the transport market.