Canadian Pacific Railway Ltd. on Wednesday stepped up pressure on rival Norfolk Southern Corp. to enter merger discussions by adding a new financial incentive to its $30 billion cash-and-stock offer.

The Calgary, Alberta-based railroad is offering a contingent-value right for each Norfolk Southern share, which it said would be paid if the value of the shares declined during a prolonged regulatory review. It said the contingent rights could be worth as much as $3.4 billion.

Norfolk...