Originally Posted by
MSPeconomist
People just need to be aware of what price discrimination means. It's not discrimination in the sense if how that word is usually used, for instance minorities aren't being offered different prices.
Actually it is - the criterion for discrimination is in terms of a market characteristic - which is not dissimilar from traditional discrimination experienced in the 50's - the lunch counter, the bus, and the water fountain as examples. The characteristic was race - in the case of airline fares it is conditions of the purchase - i.e. Saturday night stay, direct versus connection, route, etc.
Originally Posted by
MSPeconomist
Lots of things airlines do are partly for price discrimination. One big example would be advanced purchase and Saturday stay over fares, which tend to cause business travelers to pay more for tickets.
The first is not exactly correct but certainly the second is a bonafide example of price discrimination - remember, the criterion for "effective" discrimination is that the two markets are differentiable and the "product" cannot be moved from one to the other. In the case of the "advanced" purchase, it relates in part to the willingness of a purchaser to assume the risk of travel plan changes. It is only "discrminiatory" in that there are fare buckets and limited availability. Its like shoe sizes and sales only in reverse. You wait until the clearance sale and you may not get your size.
Originally Posted by
MSPeconomist
On the FF side, an example would be not giving any or full miles on some discounted tickets, so that many FFers will buy more expensive fares in order to get the miles.
No - this is not price discrimination, this is an example of product differentiation. For example, you have two choices - to buy a ticket with miles for $200 or one without miles for $150. Both give you a seat in Y and both give you a trip from point A to point B. For the extra $50 you get 2000 MQMs and RDMs. You just bought miles plus the ticket as opposed to the ticket alone. Not much different than "supersizing" for a $1 at MickeyDs.
Price discrimination would be the case where you can buy a theatre ticket for Thursday afternoon for $5 but would need to pay $20 for the same seat on Saturday night.
Originally Posted by
MSPeconomist
One could analyze this as a bundles sale too, and treat flight versus flight and miles combination as different products being offered for sale, of course at different prices.
Which is product differentiation - whether it occurs within or between firms is immaterial.
FF programs are not price discriminatory - they are by definition, product differentiators. Examples of price discrimination in the traditional sense are few and far between.