Editing Price discrimination (section)

===Travel industry===
[[Airline|Airlines]] and other travel companies regularly use differentiated pricing to sell travel products and services to different market segments. This is done by assigning capacity to various booking classes with different prices and fare restrictions. These restrictions ensure that market segments buy within their designated booking class range. For example, schedule-sensitive business passengers willing to pay $300 for a seat from city A to city B cannot purchase a $150 ticket because the $150 booking class has restrictions, such as a [[Saturday-night stay]] or a 15-day advance purchase, that discourage or prevent sales to business passengers.<ref>{{Cite journal |last=Stavins |first=Joanna |date=2001-02-01 |title=Price Discrimination in the Airline Market: The Effect of Market Concentration |url=https://doi.org/10.1162/rest.2001.83.1.200 |journal=The Review of Economics and Statistics |volume=83 |issue=1 |pages=200–202 |doi=10.1162/rest.2001.83.1.200 |issn=0034-6535 |s2cid=15287234}}</ref> However, "the seat" is not always the same product. A business person may be willing to pay $300 for a seat on a high-demand morning flight with full refundability and the ability to upgrade to first class for a nominal fee. On the same flight, price-sensitive passengers may not be willing to pay $300 but are willing to fly on a lower-demand flight or via a connection city and forgo refundability.

An airline may also apply differential pricing to "the same seat" over time by discounting the price for early or late bookings and weekend purchases. This is part of an airline's strategy to segment price-sensitive leisure travelers from price-inelastic business travelers.<ref>{{Cite journal |last=Dana Jr. |first=J.D. |date=1998-04-01 |title=Advance-Purchase Discounts and Price Discrimination in Competitive Markets |url=https://www.journals.uchicago.edu/doi/10.1086/250014 |journal=Journal of Political Economy |volume=106 |issue=2 |pages=395–422 |doi=10.1086/250014 |issn=0022-3808 |s2cid=222454180}}</ref><ref>{{Cite journal |last1=Puller |first1=Steven L. |last2=Taylor |first2=Lisa M. |date=2012-12-01 |title=Price discrimination by day-of-week of purchase: Evidence from the U.S. airline industry |url=https://www.sciencedirect.com/science/article/pii/S016726811200203X |journal=Journal of Economic Behavior & Organization |language=en |volume=84 |issue=3 |pages=801–812 |doi=10.1016/j.jebo.2012.09.022 |issn=0167-2681}}</ref> This could present an arbitrage opportunity in the absence of restrictions on reselling, but passenger name changes are typically prevented or financially penalized.

An airline may also apply directional price discrimination by charging different roundtrip fares based on passenger origins. For example, passengers originating from City A, with a per capita income $30,000 higher than City B, may pay $5400–$12900 more than those from City B. This is due to airlines segmenting passenger price sensitivity based on the income of route endpoints.<ref>{{Cite journal |last=Luttmann |first=Alexander |date=2019-01-01 |title=Evidence of directional price discrimination in the U.S. airline industry |url=https://www.sciencedirect.com/science/article/pii/S016771871730351X |journal=International Journal of Industrial Organization |language=en |volume=62 |pages=291–329 |doi=10.1016/j.ijindorg.2018.03.013 |issn=0167-7187 |s2cid=158868627}}</ref> Since airlines often fly multi-leg flights and [[No-show (airlines)|no-show]] rates vary by segment, competition for seats takes into account the spatial dynamics of the product. Someone trying to fly A-B is competing with people trying to fly A-C through city B on the same aircraft. Airlines use [[yield management]] technology to determine how many seats to allot for A-B, B-C, and A-B-C passengers at varying fares, demands, and no-show rates.

With the rise of the Internet and low fare airlines, airfare pricing transparency has increased. Passengers can easily compare fares across flights and airlines, putting pressure on airlines to lower fares. In the recession following the September 11, 2001 attacks, business travelers made it clear they would not buy air travel at rates high enough to subsidize lower fares for non-business travelers. This prediction has come true as many business travelers now buy economy class airfares for business travel.

Finally, there are sometimes group discounts on rail tickets and passes (second-degree price discrimination).