Thursday, September 18, 2014

Group Pricing By United Airlines

In class I have been talking about price discrimination or what might be better termed variable pricing.  (Not dynamic pricing as dynamic is time based pricing as opposed to customer based pricing - yes that article below calls it dynamic pricing, but I make a difference between the two).  United Airlines uses group pricing, where the groups are the customers demand for types of seats (more leg room, aisle seats, window seats, middle seats) and the article states that United will charge 16 different sets of prices for the same flight.  As I show in class, this type of pricing strategy (also called market segmentation) can be profit increasing when firms face similar marginal costs.

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