Airline Price Discrimination Essay

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Throughout history, prices were set between sellers and buyers through negotiations with one another. Usually in these circumstances, sellers would ask for higher prices, while buyers would offer less for certain goods or services. Through deals, they would come to a mutual agreement of price acceptance. Price is the only attribute in marketing mix that yields revenue, all other attributes produce costs (Kotler, 1997). Companies often use different pricing techniques to stimulate early purchase specially to accommodate differences in customers, products and locations. Marketers often refer to such pricing as discriminatory.
Price discrimination is often used as a strategy for setting different prices for the same goods and services to different
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In the short run, airlines price strategy is set to maximize revenues by selling tickets in advance to their targeted segment like: students and families going back home. In addition, separating segments, airlines discriminate customers between business and leisure applying weekend pricing rule. Any passenger that was travelling during the weekdays was considered to be a business passenger, therefore, had to pay a higher ticket price (Alves and Barbot, 2009). Moreover, other evidence shows that airlines offer a series of what is called "bins" or "buckets", where it includes different characteristics of travel arrangement such as class, ability to refund, advance ticket purchase, restrictions on minimum and maximum of trip duration and or weekend stayover. Such airline companies are Southwest, operating mainly in USA and Wizzair Europe with its establishment in Hungary. In this bucket, airlines limit the quantity of low price tickets by offering in certain occasion only for certain days of the week, or available only for round trips. Their target customers for high priced tickets in these circumstances is not only business customers, but also less informed customers that do not purchase their tickets online and compare fair trips (Sengupta and Wiggins, …show more content…
For Christmas and New Year their offered discount prices of Xbox games from $49 to $25 then to $15. From a retail perspective even though this strategy could bring higher revenues in short run, this practice can destroy long term revenues (Rafi, 2012). Retailers have to be vigilant how they set prices on their brands as it could have adverse effects on their brand names and consumption. When retailers apply dynamic pricing, it's a matter of time when those consumers that purchased the same goods at a higher price will notice that they have been cheated and scream "unfair". Cases like this could damage the company brand and risk of mistrust may have affects. Such lessons Apple had to pay in 2007, when it introduced its first IPhone with a price of $599, then dropped the price after only 68 days into $399. Apple consumers after hearing about this were furies, however, Apple gratefully handled the case and offered $100 vouchers for the damaged consumers (Rafi,

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