Question

In two or three sentences, explain why the following scenario is an example of price discrimination: The airline charges Justin $200 for a ticket. The airline charges Nathan $300 for a ticket on the same flight.

Answer 1

Price breakdown is one way some companies use to increase their revenues. This is a very common practice in oligopolized markets (where few companies provide the service) as in the case of airlines where companies charge different fees for passengers flying on the same flight. The fees charged depend on computational algorithms, companies seek to map leisure travelers (and tend not to pay high prices) and business travelers (who need to pay a higher price if necessary). The practice of price discrimination is legal and is observed in other niches. Another example might be a freelance lawyer who may charge different price to different clients by providing the same service to both.

Answer 2

Even though they are on the same airline,Nathan was charged an extra $100.However,we do not know if Nathan got a better seat,say business class instead of coach.