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Disadvantages Of Airline Pricing

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Airline Pricing – Part 1 – Fare Structures: This video explains how airlines build their fare structure and specifically why people find so many fares for the same airline in the given market. The fare structure includes the initial price, initial quantity, revenue, and the demand. According to the video, airlines usually try to find a way to maximize their revenue. Their revenue is affected on the amount of people (demand) that are willing to pay for the initial price and the initial quantity. Apparently, not every person is willing to pay for the same price. So even though there is a good amount of revenue that comes from the initial price, there is still more revenue that can be gained. Therefore, increasing the amount of fares can …show more content…

Apparently, customers who are willing to buy the initial fare would tend to buy the fare with the least price just to save money. This is a major problem since it could decrease the revenue. However, a solution for this problem is to place pricing restrictions. These pricing restrictions can prevent a costumer from going into a lower fare. Therefore, each fare can now be categorized for different people based on what they feel comfortable with (this is known as price …show more content…

There is either an increase or a decrease on the market. In a fare increase, the portion that consists of inelastic in a demand curb can blazon that if prices are increased the total revenue would be higher. For instance, if the initial price was $100 and it increases to $110, while the initial quantity was $50 and it failed to a quantity of $48. This would signify that as it increases in price the quantity decreases which causes an increase in revenue.
Airline Pricing Part 7 Game Theory:
This video is about pricing strategies include price decreases and discounts, cost-plus pricing and price discrimination. The effectiveness of price reductions for a firm operating under oligopolistic conditions, such as airlines, depends upon the reactions of other airlines in the market. This is because firms are interdependent. Game theory and the kinked demand curve can help the price reductions in oligopolistic mark

Airline Pricing Part 8 Fare

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