Discuss an example of price discrimination.

Economics exists everywhere in our life. It plays an important role in explaining how the world works, how people behave in the society and how the government makes decisions on policies to deal with the relations with other countries. However, today I’m going to talk about something about “price discrimination”, which, from my perspective, is the most wise and efficient way for a company to maximize its revenue.

Price discrimination, by definition (on Google), is the action of selling the same or similar product at different prices to different buyers, in order to maximize sales and profits. In my opinion, selling the airline tickets is one kind of price discrimination.

Let’s look at the flight prices of four airline companies (American Airlines, Southwest Airlines, United Airlines and Delta Airlines) as an example. I randomly choose a single trip from Boston (BDL) to Los Angeles (LAX) on a weekday April 17^th(Monday), the regular ticket prices for the four airlines companies are: American Airlines 300-500 dollars; Southwest Airlines 300-400 dollars; United Airlines 200-400 dollars; Delta Airlines 400-600 dollars. Then, I also look up prices for a single regular trip on April 21^st, a Friday, the ticket prices are obviously cheaper than that on a weekday: American Airlines 300-500 dollars; Southwest Airlines 250-300 dollars; United Airlines 300-600 dollars; Delta Airlines 200-350 dollars. By comparing those flights, we can find that the prices for the flights on the same day does not vary a lot from those four different airline companies. The highest and lowest prices vary about 100 dollars. In addition, while looking through the prices for the whole week from April 17^th (Monday) to April 22^nd (Saturday), we can find a phenomenon that for all those airline companies, the flight prices from Monday to Saturday gradually become lower. Flights on Sunday are still very cheap but have slightly higher prices than that on Friday or Saturday (several dozens of dollars higher). The most expensive tickets in the week are on weekdays, especially a typical weekday such as Monday or Tuesday. The flights on weekends are cheaper than that on weekdays. Flights within better time periods are more expensive as well-flights in the morning or in the afternoon are more expensive than that early in the morning or at late night. Of course, first class flights are way more expensive than the regular ones because they have larger space and better meals and drinks served.

Now you may have a question that “Why flights on weekdays are more expensive than that on weekends”? Generally, people travel on weekends so flights on weekends have higher demands; however, flights on weekdays are for business purpose and are more demand inelastic than flights for tourists. Tourists have a various choices of ways of transportation (many substitutes) to reach their destination-by bus, by car, by train. If the flight ticket is too expensive from their imagination, they can even easily change their destination for travel. On the other hand, if a businessman needs to go to somewhere to attend a meeting, he or she must go to that place on time for business profit. It is not easy to change a destination or give up journey because of high flight prices. Usually the ticket prices are paid for businessmen by company, they don’t have to pay it themselves, so why not go on a business trip? Business meeting is more important than a traveling purpose. In this way, airlines companies successfully take advantage of demand elasticity to set flight prices using price discrimination.