Auctions and Airline Tickets
This article gives an in depth view on how airlines are able to sell tickets for the same price at varying different price points. There are several factors that go into the pricing of tickets, such as what time of year the flight is, how early in advance the ticket was purchased, and where the flight is going. For example if you are trying to buy a last minute flight around Christmas, the fare will be much higher than buying the same flight 3 weeks in advance and leave a week or two after Christmas rather than a busy time for travel. The article says that businessmen are generally the ones buying last minute flights and usually have the money and are willing to pay the higher price because they do not really have any other choice if they need to go somewhere. The airlines will also raise prices during busier travel times because there are more people bidding for seats which means the airline can fill up the plane without offering their lower fares, and thus make more money.
There is a bit of an auction happening on both sides. Travelers have their individual values for what they are willing to pay for seats on a plane. At the same time, airlines are competing with other airlines to get you on their flight while also trying to make as much money as they can. In a weird way it can be looked at a descending bid auction, where the airline lowers the price until someone is willing to pay, and the process repeats until all the seats are sold out. As more seats start to fill up and it gets closer to the day of the flight, the airline will be able to sell tickets at a higher price because the seat value has gone up to the travelers due to time restrains and limited number of seats. The airline’s goal is to get as much money out of each and every seat without leaving too many empty seats, so continually running a descending price auction makes a lot of sense. What I found fascinating about the article is how airlines are able to predict and set prices accordingly at different prices to try and get the most for each seat. An example to help show how it is a descending auction would be to consider buying a last minute price on Christmas Eve, and a last minute flight on a random Tuesday in January. That last minute flight is going to be much more expensive because the value for the bidders will be so high, the second a seat opens up there are going to be lots of people willing to pay whatever it takes to get that flight. On the other hand, for that flight on a random Tuesday, the airline will offer a much lower price because they are just trying to fill up empty seats on the plane and there will not be as many people fighting for an open seat, so the bidders value will be lower.