How Airlines Use Third Degree Price Discrimination to Sell Airline Tickets

How Airlines Use Third Degree Price Discrimination to Sell Airline Tickets

When it comes to airline tickets, are you ever left wondering why the person sitting next to you on the same flight paid a vastly different price for their seat? If so, you’re not alone. Airlines have been using third-degree price discrimination to sell their seats for decades, and it’s a tactic that remains incredibly effective.

So, what exactly is third-degree price discrimination? Essentially, it refers to the practice of charging different prices based on different characteristics of the consumer. In the case of airlines, this often means charging more to passengers who are more willing to pay for a particular seat. This is done through a variety of factors, such as time of booking, destination, and even browsing history.

One of the most common ways airlines use third-degree price discrimination is through dynamic pricing. This means that the price of a particular flight can fluctuate depending on a range of different factors. For example, if an airline sees that a particular flight is selling out quickly, they may increase the price of the remaining tickets to match the higher demand.

Similarly, airlines can use “bundles” to entice passengers to pay more for certain perks or conveniences. For example, they may offer a package that includes priority boarding, extra legroom, and additional baggage allowances for an additional fee. This bundle may be more expensive than simply buying the baseline ticket price, but it’s often seen as a valuable investment for travelers who prioritize these amenities.

Another popular tactic is offering different prices for flights based on the time of booking. For example, if someone is booking a flight months in advance, they may be offered a lower price than someone who is booking the same flight just a few days before departure. This is because airlines know that last-minute travelers are often willing to pay a premium to secure their flight, whereas someone who has planned their trip well in advance is less likely to be as concerned about price.

So, how do airlines determine which passengers are willing to pay more for a particular flight? One way they do this is through tracking browsing history. If someone has been browsing flights to a particular destination frequently, airlines may assume that this person is very interested in visiting that location and may be willing to pay more for the flight. Likewise, they may offer lower prices to passengers who have browsed but not yet booked a particular flight, in the hopes of securing their business.

Overall, third-degree price discrimination is a key tactic that airlines use to sell airline tickets effectively. By taking advantage of a range of different factors, they’re able to tailor pricing to different types of consumers and maximize their profits. So the next time you’re booking a flight, keep in mind that the person next to you may have paid a very different price for their seat!