Archive for August, 2012

Airline Price Discrimination…or Bungling?

August 12, 2012 Leave a comment

Adam Minter gets quoted 5 different prices within one day, and wonders why:

So what’s going on here? How could Delta’s change ticket fees on an international flight reservations vary by more than $200 over the course of a couple of minutes? I can divine four possibilities:

  1. Delta’s customer service representatives are working on a commission basis, and thus have wide latitude to set and sell change ticket fees.
  2. Delta’s customer service representatives are poorly trained and thus don’t know how to obtain best possible pricing for the airlines’ customers via the airlines’ computer system.
  3. Delta’s computer system is buggy, and provides inconsistent results.
  4. Delta’s computer system is highly sophisticated and provides change ticket fees based on customer history and perceived willingness to pay

My guess is #4. This is what happens when you get good at microeconomics but isolate that knowledge from principles of client relationship management: technically what you are doing makes sense, but when it alienates customers, you get a different result.

So here’s a great synthesis assignment in the making: determine how much Delta is likely to lose in customer alienation and compare that to the gains from price discrimination? (Hint: Your assumptions about how many of Delta’s customers are like Adam Minter is going to influence your answer to a great extent.)

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