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This analysis uncovers how airlines use different pricing strategies to maximize revenue, indicating significant consumer impacts.
Price discrimination in the airline industry is a strategic practice where airlines charge different fares for the same service based on factors such as booking time, passenger type, demand, and service class. This approach allows airlines to maximize revenue by capturing consumer surplus from business and leisure travelers with varying willingness to pay. Strategies include advance-purchase discounts, last-minute pricing, differentiated cabin classes, loyalty programs, and route-specific pricing. Dynamic pricing systems enable airlines to adjust fares in real-time according to demand fluctuations. By segmenting customers and offering personalized pricing, airlines optimize seat occupancy while enhancing profitability.
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A et al. (2026) studied this question.
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