Welcome to the 95th edition of our Newsletter EdGenie's 📜 Sunday Scroll...

Every Sunday I send out actionable tips, tricks and real-world application insights from my 15 year experience coaching students to achieve As and A*s in their Economics A Levels via EdGenie.

Hey Genies, 👋

😊Airlines’ History of Price Discrimination
Airlines have long used price discrimination to boost profits by charging different prices based on booking behaviour and flexibility.
👩‍💼 Targeting Solo Business Travellers
Major US airlines—American, Delta, and United—have recently been charging higher fares to solo travellers, especially during weekdays.🧳
😠 Backlash from the Travel Community
Travel bloggers criticised the practice, calling it “greedy” and demanding government intervention. Delta and United backed off after criticism, but American Airlines persisted.
📊 Data Investigation Confirms the Strategy
The Economist analysed 19,000 fares across 3,200 routes and found that American and United still charge more per person for solo weekday travellers.
📈🪙 American Airlines Leads in Solo Fare Hikes
American applied the tactic most aggressively: on 57% of its routes, solo travellers paid at least 5% more—especially where there was no competition from low-cost airlines like Southwest.
🔄 Weekend Travel Offers Better Deals
Round-trip prices dropped significantly for both solo and paired travellers when the return leg was on Saturday, showing airlines tailor prices by expected demand.
💡 Unintended Consequences of Criticism
Public complaints led rivals to abandon the tactic, but rather than lower solo fares, they raised group prices—highlighting how exposure doesn’t always benefit consumers.
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Q. Define price discrimination and explain how airlines use it to increase revenue.
A. Price discrimination is when a firm charges different prices to different consumers for the same product, not based on cost. Airlines use third-degree price discrimination by segmenting travellers by characteristics like time of travel or group size. For example, solo weekday travellers—typically business passengers—are charged higher fares than weekend or group travellers. This allows airlines to extract more consumer surplus and increase total revenue.

Q. Using a diagram, show how a firm with market power can charge different prices to different consumer groups.
A. The diagram should show a monopolist with separate demand curves for two consumer groups (e.g. business vs leisure travellers), with a higher price and lower quantity for the inelastic group. The firm maximises profit where MR = MC for each group, setting a higher price for the inelastic demand. This reflects how airlines charge business travellers more than leisure travellers on the same route.

Q. Explain two conditions necessary for a firm to successfully implement third-degree price discrimination.
A. Firstly, the firm must have some degree of market power to set prices above marginal cost. Airlines like American and United operate in oligopolistic markets where they can influence price. Secondly, the firm must be able to separate markets and prevent resale. In this case, ticket names and boarding IDs prevent arbitrage. They can identify solo weekday travellers—often business clients—and charge them more based on expected willingness to pay.

Q. Using the example from the airline industry, explain how the elasticity of demand affects the firm’s pricing strategy.A. Business travellers usually have inelastic demand because their travel is urgent and paid for by employers. Airlines exploit this by charging them more, especially on weekday routes with fewer leisure travellers. Leisure travellers, who are more price-sensitive, are charged lower fares—especially on weekends or in groups. This use of PED lets firms maximise revenue by adjusting prices across different elasticities.

​​Q. Evaluate the extent to which price discrimination benefits consumers in the airline industry.
A.Price discrimination can benefit some consumers through lower fares—e.g. weekend or group travellers who get cheaper rates. It also helps firms cover fixed costs and maintain services on low-demand routes. However, solo travellers face higher prices simply due to their travel pattern, not consumption level, raising equity concerns. Transparency is low, and information asymmetries make it hard for consumers to compare. Overall, while some benefit, others—often without alternatives—are worse off, limiting net consumer gain.

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