The Successful Price Discriminator

We arrived in Toronto for our layover this morning at 10:30 AM.  Our direct flight to Beijing leaves at 2:30, so I have a few hours to kill.  However, a bit of bad news: my camera doesn’t seem to like to work.  However, this doesn’t mean no pictures; I’ll buy a few disposable ones.

On the flight from Boston to Toronto, I had some time to ponder.  The difference between my seat and first class was about 5 feet and all that separates them from us is a thin curtain.  I wonder: how much more did they pay for their ticket?  Twice as much?  Thrice?  And yet, they did not get to Toronto twice as fast as I.  The leg room is about the same & the program on the TV is the same.  The food is different, though; their breakfast smells of sausage, hash browns and eggs.  But did they pay all this extra money for the breakfast?  Indeed, as my eyes wondered around the cabin, probably no two people paid the same price for their seat.

Why, then, is Air Canada, or any airline for that matter, able to charge different prices for essentially the same service?  Part of it is service; 1st class get a few more perks than economy class.  Part of it is value; each passenger values the flight from Boston to Toronto and pays accordingly.

Mostly, however, it is the product.  Whether or not the seats are occupied, the plane is going to Toronto.  Unlike a durable product, such as a book, this good is perishable.  Every empty seat is revenue lost for the airline.  An airline can ensure its seats are filled by changing prices (AKA Price Discrimination) based upon the situation.

Airlines are by far the most successful price discriminators but are hardly the only ones: entertainment venues, such as stadiums, movie theaters, or golf courses, also price discriminate (examples include senior citizen discounts, manatee prices, etc).

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4 Responses to The Successful Price Discriminator

  1. Socialist says:

    How would you compare the ability of a car dealer to the ability of an airline to price discriminate? I think you wanted matinee pricing rather than manatee.

  2. Hey Jonny,

    It’s your brother Robert! You’ll see, as you fly more you can more often than not if you don’t have first class you can upgrade for FREE to first class if the plane is taking off and not all the first class seats are filled. They usually ask if anyone wants to pay to upgrade before take off, but no one ever bites. Thus, once the seat belt light turns off, just stand up, cross the curtain, find and empty seat and plop your ass down in it.

    No one ever cares. The fees are rediculous, but you might see the extra perks when you get on that plane to China. The longer the flight the bigger the perks.

    Have fun! Can’t wait to read more

  3. John says:

    “Airlines are by far the most successful price discriminators” Most successful? Mostly they can only stay in business till their equipment needs major maintenance.

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