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Lumifer comments on How to save (a lot of) money on flying - Less Wrong Discussion
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No, I don't think so. For one thing, pjeby thinks that price discrimination "is generally someone lowering prices" and I don't think this is true. Price discrimination involves charging different amounts to different people, depending on their reserve price, and the seller, of course, tries to make the total/average amount as high as he can, to the best of his ability. Even if you take the seller out of the equation and look only at the buyers, price discrimination amounts to a wealth transfer from the high-reserve-price people (the wealthy and the desperate) to the low-reserve-price people (the poor and the meh, whatevs).
Agreed, but pjeby's already established that he's making the comparison to a state where price discrimination is impossible, and relative to that it does seem reasonable to expect that the mean price under discrimination will be lower, often significantly so, and especially in the context of airlines.
Only under particular certain conditions. Under other conditions this is not so.
For example in businesses where variable costs dominate the cost of the product and the economies of scale have already been realized, price discrimination will not lower average prices. Ditto for supply-constrained products.
In real life the situation is complicated because most price discrimination involves slightly different products so deconstructing the demand curves is not trivial. As an example consider deluxe game editions. You get a bit of added value (a soundtrack, maybe a printed booklet or a figurine), but the price premium is typically much larger than the value of the add-ons. What's happening? Price discrimination.
I edited my post before I checked to see if you had commented--remember that this is in the context of airlines, in which case it is absolutely true. We only have the modern air industry at the size and level of connections that it is because of the sophisticated price discrimination.
That's not self-evident to me, but we are venturing into counterfactuals by now.
In any case, I have no objection to companies trying to engage in price discrimination -- they have full rights to attempt to do so. What I object to is the idea that I, as a consumer, cannot try to game their price discrimination schemes. The suggestion that I am morally obligated to meekly go along with whatever techniques companies devise to maximize their revenues is... strange to me :-D
Only tautological propositions are truly self-evident; the rest are evident only if you look for the evidence. (Specifically, consider the profit margin of the airline industry. If we believe that price discrimination raises their revenue, a world without that would imply less revenue and thus less profit, which would put it well into the negatives, forcing cutbacks on marginal routes until we have a significantly constrained industry and customers paying much higher prices on the margin.)
It's standard reputational logic, or what people here are fond of calling "Newcomb-like" problems: only if enough people behave well enough will counterparties treat the public like they will behave. Trust is valuable, and social trust especially useful.
I don't see the relevancy to this subthread. You are not trying to say that if only everyone trusted large, not particularly high-functioning corporations everything would be just peachy -- are you? X-/
Besides, trust them to do what exactly? I trust the airline to not deliberately overcharge my credit card and to not sell the information that I will be out of town to some burglars. I do not trust it to the extent of "Eh, just charge me whatever price you think is fair", I am not going to trust it to that extent, and I think it's a good thing, too.
P.S. I two-box :-P
...he said, before proceeding to give an a priori argument.
If anyone has any data about what the airline industry would look like without price discrimination I would be very interested to see it! Before this (fascinating) thread I had never thought about the issue. It's really counterintutive, and I would be curious to know what the magnitude of the effect is.
What? If the airline industry had, say, Intel's or Apple's profit margins, then the argument that I gave would not hold. I left out what their profit margins were because I figured everyone in the conversation would either know already or look them up.
Check out, say, section 3 of this paper. (In general, "revenue management" is the term of art.) This article claims it adds 4-8% in revenue.