Price discrimination in airline industry

Price discrimination involves charging different prices to different sets of consumers for the same good. Firms can charge different prices depending on several criteria: If some people have a very inelastic demand, it means they are willing to pay a higher price. If the firm can set higher prices for these consumers it can increase its revenue and profits.

Price discrimination in airline industry

As you read the scenarios, you can play the part of one of the prisoners. The scenario Robin and Tom are prisoners: They have been arrested for a petty crime, of which there is good evidence of their guilt — if found guilty they will receive a 2 year sentence.

During the interview the police officer becomes suspicious that the two prisoners are also guilty of a serious crime, but is not sure he has any evidence. Robin and Tom are placed in separate rooms and cannot communicate with each other.

The police officer tries to get them to confess to the serious crime by offering them some options, with possible pay-offs. The options Each is told that if they both confess to the serious crime they will receive a sentence of 3 years.

However, each is also told that if he confesses and his partner does not, then he will get a light sentence of 1 year, and his partner will get 10 years. They know that if they both deny the serious offence they are certain to be found guilty of the lesser offence, and will get a 2 year sentence.

The pay-off matrix What would you do if you were one of them? Give an answer before you read on. The dilemma is that their own 'pay-off' is wholly dependent on the behaviour of the other prisoner. To avoid the worse-case scenario 10 yearsthe safest option is to confess and get 3 years. If collusion is possible they can both agree to deny and get 2 yearsbut there is a very strong incentive to cheat because, if one denies and the other confesses, the best outcome of all is possible - that is 1 year.

Fearing that the other may cheat, the safest option is to confess. Types of strategy Maximax A maximax strategy is one where the player attempts to earn the maximum possible benefit available.

This means they will prefer the alternative which includes the chance of achieving the best possible outcome — even if a highly unfavourable outcome is possible. The best pay-off for Robin from confessing is 1 year with Tom denyingand the best pay-off from denying is 2 years with Tom denying - so the best of the best is to confess I year.

Maximin A maximin strategy is where a player chooses the best of the worst pay-off. This is commonly chosen when a player cannot rely on the other party to keep any agreement that has been made - for example, to deny.

In the Prisoner's Dilemma, the worst pay-off to Robin from confessing is to get 3 years with Tom confessingand the worst pay-off from denying is 10 years with Tom confessing - therefore the best of the worst is to confess.

No Miles For You! | Lynn Harrell

In this case, both the maximin and maximax strategies would be to confess. When this occurs, it is said to be the dominant strategy.Price Discrimination in E-Commerce?

Price discrimination in airline industry

An Examination of Dynamic Pricing in Name-Your-Own-Price Markets Oliver Hinz* Il-Horn Hann** Martin Spann*** This is a preprint of the Paper. Find the latest business news on Wall Street, jobs and the economy, the housing market, personal finance and money investments and much more on ABC News.

Price discrimination in airline industry

I heard this story on NPR radio and was outraged. What a stupid mistake the airline has made. Our son is a trombonist and often runs into problems regarding putting his horn in the overhead compartments.

Price discrimination happens when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs of supply.

What are the main aims of price discrimination? What is the difference between price discrimination and product.

Cents-per-mile rule. The business mileage rate for is cents per mile. You may use this rate to reimburse an employee for business use of a personal vehicle, and under certain conditions, you may use the rate under the cents-per-mile rule to value the personal use of a .

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