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I read a hypothesis that airlines would be unsustainable without price discrimination. That is: if tickets were uniformly priced, there is no price at which tic
by uvdiv 14y ago
I read a hypothesis that airlines would be unsustainable without price discrimination. That is: if tickets were uniformly priced, there is no price at which ticket sales (demand) would exceed fixed costs. Without gouging business travelers, there wouldn't be enough revenue to subsidize the
pleasure travelers, who would stop flying because they couldn't afford unsubsidized fares. And the industry would fail.
This hypothesis is an extreme case, but it shows a mechanism how price discrimination can be welfare-increasing. That there can be tradeoffs between first-sale freedoms and societal wealth. (Because first-sale restrictions -- tying tickets to names, like a contract -- is what keeps secondary markets from equalizing airline fares).
- deleted 14y ago[deleted]
- svmegatron 14y agoIf you have a link to this, I would love to read it. It makes a lot of sense, and I'd be interested to read it in more detail
- uvdiv 14y agoThis is probably unsatisfying, but it's where I read about it: http://www.demarcken.org/carl/papers/ITA-software-travel-complexity/img22.html http://www.demarcken.org/carl/papers/ITA-software-travel-com... ToC: http://www.demarcken.org/carl/papers/ITA-software-travel-complexity/ITA-software-travel-complexity.html http://www.demarcken.org/carl/papers/ITA-software-travel-com... You could email the author and ask him, he seems to know.
- svmegatron 14y agoThank you!