Originally Posted by
Cha-cha-cha
Similarly the logic of the market would seem to refute the second objection. Due to competition for the scarce $200 seats, full fare passengers could not have a reasonable expectation that they could "change to the last minute cheap seat at the last minute, at no loss on their refundable fare." They would be gambling that they could do this, and the odds would probably not be very good. Nor does it seem true that there's no down side to such arbitrage attempts: the down side is that buying a fully refundable fare so you can cancel it if you luck out and get a cheap last minute seat means that you've foregone the opportunity to buy a cheaper non-refundable or partially-refundable seat and just use it. And are there really any fully refundable fares -- with no change fees at all? Change fees of any sort would serve as a further disincentive to attempting such arbitrage.
I travel on fully refundable fares on business for almost all of my business travel because the plans can change on a daily basis. Heading out for a deposition in Chicago? Oops, witness can't make it, or his counsel cancels, or someone files a motion for a protective order, or etc., etc., etc.
Once I am already heading to the airport and KNOW I am getting on the plane, would I change it to a $200 last minute ticket if I could, instead of my $1200 fully refundable ticket? Absolutely. But you're incorrect in thinking that a passenger such as me can't have a reasonable expectation or would be gambling. We don't care if the low fare ticket is still there -- we are flying on the full fare refundable ticket no matter what. But we would take advantage of the lower cost ticket in many cases, thereby causing the airline to lose money which it currently earns from us.
And as to your question as to whether there are REALLY any fully refundable fares out there, with no change fees? There sure are. It's a Y ticket, fully refundable. I have not paid a change fee on this kind of business travel at any time.
Sorry, but I disagree with your classic economic market explanation. My economics degree says that market free riders, such as myself, would result in last minute cheap seat causing them to lose money, not earn some extra revenue.
By the same logic, why don't Michelin starred restaurants offer their last tables and meals at bargain basement prices if they are not full with reservations? Those seats will otherwise go empty and they will lose potential marginal revenue if they don't fill every seat in the restaurant for every seating.