Describe ways in which airlines practice price discrimination. Why do they use these strategies? Defend your answers with reference to economic theory.
Your answer should include:
• An explanation of why price discrimination is possible in the market for air travel
• An explanation of why it is desirable for airlines (with some discussion of the nature of costs and revenues in the airline industry)
• Examples of strategies, identifying the ‘type’ or ‘degree’ of price discrimination being practiced.