Economics
Same seat, different prices
Two passengers sit side by side on the same flight. One paid £60 and the other £300. Why does this happen, and is it bad for passengers?
- Hint 1Who books late, and how flexible are they?
- Hint 2What happens to an empty seat once the plane takes off?
- Airlines practise price discrimination: they charge more to people willing to pay more.
- Late bookers, often business travellers, have few alternatives, so their demand is less price-sensitive.
- An empty seat earns nothing once the doors close, so cheap fares fill seats that would otherwise fly empty.
- This needs the airline to separate groups (by booking time, flexibility, luggage) and stop resale.
- It can help some passengers: cheap fares may make routes viable that would not run at one price.
Where it lands: Price discrimination between more and less price-sensitive travellers; it can expand output as well as capture surplus.
The trap: Calling it 'just greed' without explaining the conditions that make it possible and its effect on how many people fly.
What a tutor might ask next: Why do airlines stop you transferring a ticket to someone else?
Now do one out loud. In the interview you think aloud with a tutor. Try an Economics problem with hints, follow-ups and Mia's feedback on how you think.