enilria said:
I tend to think the problem is not the pricing, but the pricing is merely a symptom of too much capacity.
As I've said elsewhere of late, "too much capacity" and "too high unit costs" are synonymous market conditions.
resqicunurse said:
I'm curious as to why the rules can't be really simple..
The simplest answer is that the demand curve is bimodal. In order to maximize revenue, the seller must somehow differentiate pricing between the two modes such that the high-price mode bleeds over to the low-price mode by as small an amount as possible.
This differentiation is precisely the motivation behind the "cumbersome, complicated fares."
1. Price the route to cover the expense
Would that it were that simple. If you have a choice between a seat going empty (100% loss) or at a price that is half of cost (50% loss) which would you choose?
usairways_vote_NO said:
Collusion is already built in as fare changes are known by every airline almost instantly unfortunately it almost never works when raising fares.
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Not really. The fact that the increases haven't worked is evidence that you're seeing competitive pricing, rather than collusion. They can often look similar, but they are quite different.
usairways_vote_NO said:
I do agree with you yet I don't think the over capacity necessarily means there are too many airlines.
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I agree with you there. However, a reduction in the number of airlines
can reduce a degree of overcapacity, depending on how it is implemented. History suggests that it is unlikely, though.
tadjr said:
My question then is why are we even offering some of the fares we have when NO ONE is supposedly using them and those walk ups we could be getting are not going to pay what we are asking.
In many cases, it's because of contracts. There may be contracts with large corporations offering a discount percentage off of full Y. As long as you keep the full Y at the high level, you keep that company's fare (and thus your revenues) up.