Pricing Mysteries (with video)

Today's edition of The Wall Street Journal has an article (free content at this writing) that just begs to be used in economics class. It's about airline ticket prices. And it includes a very good video.

Airline ticket pricing has long been a mystery. Two people sitting in the same row in the same relative position (both in aisle seats or window seats) can pay significantly different prices. As we know, some of that is how soon before the flight did you buy the ticket, how long are you staying at the destination, etc.

But what about the basic cost and pricing structure of the flight. Why does it sometimes cost more to fly short distances than longer ones. Or why do two trips, of the same distance seem to have different price structures? Shouldn't marginal cost and marginal revenue fit in somewhere? This article tackles some of that. And if you're about to launch into pricing this could be helpful.

As we know, cost can be a determining factor. But it's not the whole story. Friedrich von Weiser provided some insights. His idea of alternative cost (later opportunity cost) gave more power to the consumer based on how they value the good or service, as opposed to the cost basis.

So the popularity of the destination will be a factor, as will the income of the consumer. But even those factors don't provide the whole answer. The number and type of competitors also play in. I recommend this article. Give it a read and see what you can do with it. I'd also welcome additional thoughts on its use to share with the readers.