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The economics behind "Basic Economy" – A masterclass in price discrimination

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Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#71

Post by amonroe805-2 »

cosmic_cheese wrote: post #55
slg wrote: post #51

Earlier quoted context omitted.

I think the biggest change in general corporate management in my lifetime was the deprioritizing of the concept of goodwill. I’m not naive, businesses have always prioritized profit. However, there used to be this idea that pure profit maximization ruined your brand and reputation. You didn’t want to be known as the asshole company that nickel and dimes everyone or has draconian policies that make people hate dealing…

It may just be a misperception on my part, but it appears to me that on average publicly traded companies are more likely to engage in this behavior and to greater extents than private companies. Startups can be pretty bad about it once the VCs come knocking, too. Maybe bootstrapped and private forever is the way.

Broadly agree, with the one caveat that private-equity-owned businesses seem to be even worse than public companies in this regard.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#72

Post by WorldMaker »

Zak wrote: post #50
WorldMaker wrote: post #45

Earlier quoted context omitted.

You are thinking long term profitable, but most of the current "activist investors" barely think about short term profitability, and mostly from the perspective of their own profitability selling shares or running a short somewhere and "indirectly" helping their short by giving bad advice to a different company. They mostly read the quarterly reports and that mostly to look for "easy profits" Company A is making that…

It seems to me that tax incentives favoring dividends over share price growth might make for a healthier economy. Am I way off base with this?

It's a good idea in theory if you can somehow force dividends to some long term vesting strategy to reward long term investors over short term investors.

It's a bad idea in historic practice, given the very origin of the turned out to be awful, something of the root of much short-term-ism and "activist investors" in the first place, "fiduciary duty to the shareholders" phrase was the awful Ford v. Dodge Brothers case where the Dodge Brothers were some of the earliest investors in Ford (as partners and parts dealers for Ford) and went to court to argue that record profits in a particular quarter should not be invested in long-term capital investment (a large new plant) and R&D as Ford was planning to do, but presented as a windfall of a large dividend to shareholders instead. The court agreed with the Dodge Brothers for, er, dodgy reasons, and the clear conflict-of-interest motive from hindsight of the Dodge Brothers "activist investing" in that moment was to notoriously use said dividend windfall to expand their efforts as a Ford competitor (produce more Dodge cars, if you haven't guessed) from Ford's own profits.

It's not a single court case that gets us to where we are today with short-term thinking in Wall Street, but that's such a weird foundational one.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#73

Post by ggm »

kelnos wrote: post #67
ggm wrote: post #42

Earlier quoted context omitted.

I'm not saying you're wrong but this is also much the same argument as "why do I pay more tax when I am not using public health" or other community wide benefits. Philosophically you either believe in a price which benefits the community at large, or you want the lowest price outcome for yourself and others to be exposed to their costs.

I think then you have to provide a strong argument for why a particular product/service should be considered under the "community-wide benefit" umbrella. Public health is very clearly to me a collective good: I benefit from others being healthy in so many ways. Similar things can be said about funding schools; I don't have children, but I will benefit from the next generation of adults being well-educated. Welfare an…

Thats a fair point. I think you may be right this falls on the test of public interest, where minimum seat dimensions and exit/emergency safety doesn't.

I don't personally LIKE LCC and the unbundling, I tend to believe evidence that when you are driven to LCC pricing and then factor back in the unavoidable costs it can be more expensive than the cheaper bundled product from mainlines.

Maybe the limit of regulatory control here should be "final total cost must be shown before committing" so that all taxes, airport levies, state charges, and other unavoidable costs (card processing fees?) are shown in the pricing, because I am led to believe a $99 fare can wind up $150 or more once all the unavoidable extras in that price are factored in.

Basically, I concede.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#74

Post by onlyrealcuzzo »

redczar wrote: post #14
onlyrealcuzzo wrote: post #9

Earlier quoted context omitted.

It's made it so that relatively poor people can afford to regularly fly all over the world, which is a relatively new thing. Lowe middle income people in lower middle income countries can afford to fly somewhat regularly, and even internationally, too. Flying used to be just for the rich only as far back as the 60s, and for nobody as far back as 200 years...

The vast majority of the world’s population can’t afford to fly. The relatively poor part of your comment is weird. Flying is still for the rich.

Okay, sure, if lower middle income people in China are rich.

Even middle income people in India can afford flights...

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#75

Post by robbiewxyz »

slg wrote: post #51
djoldman wrote: post #10

It appears that taking advantage of human imperfections and irrationality are taking up more and more of companies' strategies and time. You've got folks thinking constantly about advertising, pricing strategies, dark patterns, network effects that prevent or discourage churn, etc., in ways that tend to exploit flaws in the consumer's decisioning process or gaps in their knowledge, to the consumer's disadvantage. It…

I think the biggest change in general corporate management in my lifetime was the deprioritizing of the concept of goodwill. I’m not naive, businesses have always prioritized profit. However, there used to be this idea that pure profit maximization ruined your brand and reputation. You didn’t want to be known as the asshole company that nickel and dimes everyone or has draconian policies that make people hate dealing…

My gut is this comes down to lack of real antitrust enforcement. If your customers have no choice but to come crawling back to you then why treat them well?

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#76

Post by ilamont »

esafak wrote: post #3

I prefer airlines that don't nickel and dime. In fact, I prefer to fly less since the experience has consistently deteriorated over decades. If you travel internationally you get the added fun of dealing with border agents. And even they have discovered price discrimination, with their VIP lines. All told, is all this chicanery benefiting airlines?

> I prefer to fly less since the experience has consistently deteriorated over decades.

I never liked flying, but was able to put up with it better when I was younger.

Nowadays, I get some satisfaction by leveraging credit card points through my business to get "free" tickets. I mentally steel myself to the unpleasantness of the airport, boarding, and flying, and try to get as much work done on my laptop as possible when I am sitting down so at least I can feel that I accomplished something by the time I reach my destination.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#77

Post by dkjaudyeqooe »

supertrope wrote: post #60
djoldman wrote: post #10

It appears that taking advantage of human imperfections and irrationality are taking up more and more of companies' strategies and time. You've got folks thinking constantly about advertising, pricing strategies, dark patterns, network effects that prevent or discourage churn, etc., in ways that tend to exploit flaws in the consumer's decisioning process or gaps in their knowledge, to the consumer's disadvantage. It…

I have no love lost for airlines but they operate in a commoditized industry where customers sort tickets by price. All of the fat in the industry has been squeezed out and they have to claw for $20 here and there on a sale.

> All of the fat in the industry has been squeezed out

I don't know where you live but in the US this is patently not true.

Airlines are an abusive oligopoly there, with landing slots and the like cementing control of certain markets for certain airlines.

Ticket prices are much higher than they used to be and are much higher than Europe (for instance).

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#78

Post by dkjaudyeqooe »

wagwang wrote: post #39

Aren't flights at an inflation adjusted all time low and most airlines operating at a razor margin? Seems like the market doing their job. Also price discrimination sounds a lot worse than what it really is? Idk, I don't like that air travel is so easily accessible but, the pricing stuff is the least of our worries.

> Aren't flights at an inflation adjusted all time low

Yes, due to improved technology and equipment and because prices have been historically very high.

> most airlines operating at a razor margin

No, many airlines operate in imperfect markets and reap excessive profits compared to other airlines.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#79

Post by dkjaudyeqooe »

esafak wrote: post #3

I prefer airlines that don't nickel and dime. In fact, I prefer to fly less since the experience has consistently deteriorated over decades. If you travel internationally you get the added fun of dealing with border agents. And even they have discovered price discrimination, with their VIP lines. All told, is all this chicanery benefiting airlines?

> If you travel internationally you get the added fun of dealing with border agents

That's avoidable. If you are a citizen of an advanced economy flying to another you can just use the automatic passport gates.

Re: The economics behind "Basic Economy" – A masterclass in price discrimination

#80

Post by [deleted] »

sct202 wrote: post #33
paxys wrote: post #16

Low effort, AI generated, catchy title. Perfect recipe for making it to the top of news aggregators.

I was thinking it could be AI just from the bullet points bold statement colon structure, but there's a lot of grammatical inconsistencies that I'm not sure an AI would do; for example, the writer's periods and commas are sometimes inside the quotations, sometimes outside, and sometimes both inside and outside.

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