[HN Gopher] The Welfare Effects of Dynamic Pricing: Evidence fro...
___________________________________________________________________
The Welfare Effects of Dynamic Pricing: Evidence from Airline
Markets
Author : rustoo
Score : 70 points
Date : 2022-03-25 12:43 UTC (10 hours ago)
(HTM) web link (onlinelibrary.wiley.com)
(TXT) w3m dump (onlinelibrary.wiley.com)
| bannedbybros wrote:
| woopwoop wrote:
| Are there any estimates on the welfare effects of forbidding
| buyers from reselling tickets? This has always struck me as one
| of the more outrageous market distortions one encounters on a
| regular basis.
| cbdumas wrote:
| Why don't retailers of luxury durable goods use dynamic pricing?
| Surely Best Buy would love to charge the actual market price
| (~$800 from a quick eBay search) for a PS5. Sony could just
| auction batches of consoles to retailers and let them price /
| promote however they want. Instead they stick to MSRP, leading to
| shortages at retailers and leaving lots of money on the table for
| resellers. I don't get it.
| HWR_14 wrote:
| Because that nets Sony an extra $150/unit (assuming Best Buy
| pays 1/2 the unit price). But Sony's customers feel cheated.
| Customers can handle not getting a unit via a "fair" practice,
| but they resent the rich explicitly getting better treatment
| for things like that. Also, they cannot plan a budget. Right
| now, if you have $500 you have a PS5 eventually. In your world,
| they buy an Xbox or spend it on something else because they
| don't want to keep saving and getting priced out.
|
| But keep in mind consoles are all network effects, and the real
| money is on subscriptions and commissions on games. So, Sony
| gets a one time pop in revenue, fewer units lead to fewer
| exclusives, leads to more people selecting XBox in the future.
|
| I think MS was willing to lose a billion on the first Xbox to
| get sufficient traction. If we discount inflation entirely and
| assume that was a reasonable value, Sony would have to sell
| 6.67 million units to be equal to the cost of losing a console
| war. And they could always end up pulling a Sega.
| secabeen wrote:
| Because Sony wants the official retail price to be $X. If you
| get an allocation from Sony, and then sell at $x+300, you won't
| get any more allocation.
| em500 wrote:
| Some notes for the non-economically schooled readers:
|
| - Ungated (working paper) versions are here[1] and here[2]
|
| - This was published in Econometrica, one of the top journals in
| economics. That doesn't mean that the results are true, but it
| means that the the math and methodology are probably sound. If
| you want to attack the results, the weaknesses are probably in
| the (implicit) model assumptions.
|
| - In economic lingo, "welfare" means consumer surplus (buyer gets
| a good deal) + producer surplus (seller makes a profit). Standard
| academic economics analysis is indifferent wether the producer or
| consumer gets the profits (i.e. between producers selling at
| costs and consumers buying cheaper that they'd be willing to pay,
| and producers maximizing profit while consumers maximum they're
| willing to pay). "Higher welfare" in dynamic pricing vs uniform
| pricing means that the sum is higher in dynamic pricing. In this
| context it basically means that more flights are flown using
| dynamic pricing than would have been in uniform pricing. Negative
| externalities from more flights are usually out of scope for a
| paper like this.
|
| - Airlines can adjust prices continuously for the same flight as
| a response to demand changes, or price discrimination (charge
| more to those willing to pay more, i.e. business travelers). The
| paper claims as a key contribution the disentanglement of these
| motives. I haven't gone through it to see if it's sound, but when
| since it's published in Econometrica, it will probably take quite
| some time to fully digest.
|
| [1]
| https://www.nber.org/system/files/working_papers/w28989/w289...
|
| [2]
| https://cowles.yale.edu/sites/default/files/files/pub/d21/d2...
| clairity wrote:
| > "Standard academic economics analysis is indifferent wether
| _[sic]_ the producer or consumer gets the profits... "
|
| that's an objective-sounding position to take, but it's
| certainly not, even from a purely detached, academic
| perspective. in most situations, consumer surplus is better for
| a market and for the overall economy, because it provides more
| choice points for more efficient allocation. in the
| unfortunately rare case of a relatively fair and competitive
| market, producer surplus _can_ be a net good, making the
| overall market and economy more efficient, but in practice,
| companies have shown time and again to be pretty poor
| allocators of capital because they necessarily take fewer bets
| with larger amassed asset pools. however, economists generally
| (implicitly) assume _a priori_ that markets are relatively fair
| and competitive in their analyses (akin to assuming
| frictionless infinite planes).
|
| all that's to say, size does matter, negatively beyond some
| optimal point on the economies of scale/scope curves. as such,
| markets are at their best when populated primarily by small- to
| medium-sized companies, with no artificial barriers to new
| entrants (e.g., not the airline industry).
|
| no matter the 'prestigiousness' of the journal, seemingly small
| (implicit) assumptions like this that can have huge
| implications on results necessitates skepticism toward academic
| economics.
| bschne wrote:
| > seemingly small (implicit) assumptions like this that can
| have huge implications on results necessitates skepticism
| toward academic economics
|
| It mostly just means you need to be very careful in
| interpreting the results, or be careful when someone uses it
| to motivate policy prescriptions as they themselves may have
| a questionable interpretation -- like with any academic
| finding.
| geysersam wrote:
| Isn't the conclusion trivial? With perfect price
| discrimination, every buyer exposes their exact utility gain
| from buying the product, that's the price they'll pay for it.
| Of course the resource will be allocated optimally.
|
| Naturally in this situation only the seller will benefit from
| the transaction. Everyone else is +-0. Utility/"welfare" is
| maximized but consumers get none of it.
|
| And of course, in the end even talking about utility assumes
| the price someone is willing to pay reflects their utility
| gain. This is the most fundamental assumption in economics, but
| it's pretty clear that in the real world this is not the case.
| Especially for luxury goods such as air travel.
| lotsofpulp wrote:
| > And of course, in the end even talking about utility
| assumes the price someone is willing to pay reflects their
| utility gain. This is the most fundamental assumption in
| economics, but it's pretty clear that in the real world this
| is not the case. Especially for luxury goods such as air
| travel.
|
| Why? I would expect luxury goods to reflect utility very
| accurately since they are not necessary purchases.
|
| If you are paying $1k to go travel to Disney World, then that
| seems like a pretty good signal that the flight to Disney
| World gave you at least $1k worth of utility.
| geysersam wrote:
| Does the $1k to go to Disney land buy the same utility as
| the $1k average yearly income in Bangladesh?
|
| Or the utility a 80th percentile household in the US could
| buy for the same amount.
| lotsofpulp wrote:
| I have never heard of utility to be used as an objective
| measure. It is subjective, symbolizing an individual's
| (perceived) value of a transaction relative to other
| possible transactions.
|
| https://en.wikipedia.org/wiki/Utility
|
| > a utility function that represents a single consumer's
| preference ordering over a choice set but is not
| comparable across consumers. This concept of utility is
| personal and based on choice
| geysersam wrote:
| Of course utility is used as an objective measure. That's
| the basic foundation of utilitarianism, and
| utilitarianism is the ethical foundation of market
| economics.
| solveit wrote:
| Philosophers spend a lot of time trying to figure out a
| way to define an objective measure of utility that can be
| compared across different people. This is necessary for
| many formulations of utilitarianism. And probably many HN
| commenters are more familiar with the word in this
| context. That economists use the same word with a much
| more limited scope does tend to detract from discussions
| like this, I feel.
| lotsofpulp wrote:
| This discussion is specifically about economics, linked
| to an article in a prominent economics publication.
| geysersam wrote:
| The paper talks about maximizing "welfare" what is that
| if not an objective measure of utility?
| solveit wrote:
| > even talking about utility assumes the price someone is
| willing to pay reflects their utility gain
|
| It does. It reflects their utility gain relative to the
| utility they gain by spending that money somewhere else,
| or just keeping the money for the future. People not made
| of straw do not generally believe that the price someone
| is willing to pay reflects somebody else's utility. Nor
| are they unaware of the tendency for marginal utility to
| decrease.
| notahacker wrote:
| It's nontrivial because the price discrimination isn't
| perfect, and the paper looks at a number of secondary
| considerations (most notably the assumption that pricing
| dynamicalkly purely based on how far in advance bookings are
| made captures the difference between a class of business
| travellers who prefer a situation in which they have to pay
| _even higher_ prices to ensure seats are available with a day
| or two 's notice, and leisure travellers whose flexibility
| around travel dates means they care more about price than
| availability of the lowest price tickets)
|
| I do agree that it's unremarkable that price discrimination
| results in higher total welfare than uniform prices though,
| and all the other conclusions are completely in line with
| expectations. Its also the case that the airline's own price
| discrimination models will be more sophisticated with access
| to better (commercially sensitive) data than this stylised
| version
| DiggyJohnson wrote:
| I think you might find lots of economics results to be
| "trivial", because the results do not contain the value of
| the work. Constructing a model, linking it to reality, and
| finding that it fits our expectations (captured in the
| "trivial conclusion") and is robust to secondary factors is
| what's valuable.
|
| Think about the study of inflation. I'm sure lots of work has
| been done to show how low interest rates have impacted
| inflation. I won't be surprised when they show how these
| interest rates have led to increased inflation, but I'll be
| interested in the mechanics and model leading to the
| unsurprising result.
| tomrod wrote:
| Note that journal is _Econometrica_ , not _Econometrics_ , and
| is widely considered _the top_ journal for quantitative work in
| economics. (slight nitpick in case OP statement causes
| confusion).
|
| This is the kind of paper that goes a far way to establish
| tenure. Good job to the author if that is their stage in their
| career.
| em500 wrote:
| Noted and corrected, thanks.
| IG_Semmelweiss wrote:
| I agree with the paper's conclusions. Dynamic pricing is a good
| thing. But lets take a counterexample:
|
| Amazon tried this years ago. They changed pricing on the same sku
| based on who was shopping for it.
|
| The blowback was tremendous. Amazon had to actually back down.
|
| My take is that consumers understand and are willing to put up
| with dynamic pricing for airplane seats because the algorithm is
| presumably understood.
|
| I'm willing to accept that the person sitting next to me on an
| airplane may have paid 1/3 than the price I paid on my ticket.
| Maybe the person next to me booked earlier, or booked when the
| airline had a promo going. Sounds reasonable.
|
| But what happens when airlines quietly change algos...to raise
| prices because of my browsing habits, IP, or CC used?
|
| I bet you this is coming
| pessimizer wrote:
| > to raise prices because of my browsing habits, IP, or CC
| used?
|
| Or higher prices because you have Prime, or pricing either
| intentionally or inadvertently based on race, sex, religion, or
| sexual orientation?
| JoshTriplett wrote:
| > My take is that consumers understand and are willing to put
| up with dynamic pricing for airplane seats because the
| algorithm is presumably understood.
|
| I think consumers put up with dynamic pricing for airline seats
| because they don't have another option available, and because
| it's a long-standing practice that didn't _change_ in an era
| where that change would have generated blowback.
|
| > But what happens when airlines quietly change algos...to
| raise prices because of my browsing habits, IP, or CC used?
|
| This has already happened:
| https://business.time.com/2012/06/26/orbitz-shows-higher-pri...
|
| Orbitz showed higher prices to Mac users because they figured
| (probably correctly) that Mac use was correlated with
| willingness to pay more. They stopped that practice when it
| became widely known, but it wouldn't surprise me at all if
| others do the same and don't get caught.
| tomrod wrote:
| > Dynamic pricing is a good thing
|
| I'm not sure dynamic pricing is necessarily pareto improving (I
| think this might be what you mean by "is a good thing"? For
| folks that are learning this lingo, pareto improving -- at
| least one party better off and none worse off). I'd have to
| think through it a bit.
| colinmhayes wrote:
| Plenty of good things are not pareto improvements. If someone
| is a little worse off but someone else is much better off
| that is a good thing.
| tomrod wrote:
| I believe that depends on the ethical system you espouse.
| Egalitarianism, yes. Utilitarianism, not necessarily (so-
| called utility monster). And so on.
| hammock wrote:
| It's definitely not. This is why the welfare effect is
| described in the abstract as having directionality
| offbynull wrote:
| > to raise prices because of my browsing habits, IP, or CC
| used?
|
| How would this work when most people get their flights through
| aggregators? I search for flights on Google Flights. I imagine
| Google Flights just hits a database somewhere to get times,
| prices, number of stops, etc.. rather than share my information
| with every airline.
| shmatt wrote:
| From my personal experience that sort of stuff doesn't happen
| anymore due to aggregators. Prices do change based on the
| moment you searched, but I've constantly been getting the
| same price across ITA Matrix / Google Flights / Airline
| Official Website / Priceline
|
| No Incognito or VPN needed
|
| What I do still see changing based on different metrics like
| IP are car rental prices and hotel prices
|
| All US car rental companies give much cheaper prices to
| foreigners. I don't know the reasoning but its absurd, A
| rental car in Manhattan for Easter weekend will cost you
| $300/day on kayak.com and $70/day at the same exact branch on
| kayak.com.hk (this also works on the companies official
| websites when changing "country of residence")
| saiya-jin wrote:
| I never, ever, super-duper seriously ever again buy airline
| tickets from anybody but airlines directly. Use to be cheap
| like that, thinking how clever I was saving few bucks here
| and there just by using other seller for the same plane. I
| use search engine to look generally what's the pricing/timing
| situation but that's it.
|
| Then you hit issues, delayed flights etc. and every single
| helpdesk' first question is: did you book with us or through
| reseller? If by reseller, please contact them, goodbye and
| have a nice day. If by us, here is completely brand new
| ticket for free at best possible available time.
|
| Life if too short and I am too poor to deal with such crap
| when traveling (which is in my case only for vacations, no
| point ruining them by trying to save few bucks). And quite
| often direct selling is same price as the other sources.
| Ekaros wrote:
| For vacations it might make sense to buy from travel agency
| at least in EU. Flight cancelled? Don't have to worry about
| getting refund on other things either. I had vacation
| booked when covid hit with all restrictions,
| flight+hotel(my choice) from agency, full refund without
| any questions asked.
|
| So either go with agency, pay the premium for them to sort
| it out if possible. Or then directly to airline. The
| results might vary, but per location there might be perks
| with either.
| injidup wrote:
| I have just run into this with Bravofly. Bought two tickets
| with Singapore airlines. 4 legs were booked. 14 days before
| the flight I get an SMS saying Singapore Munich is
| cancelled.
|
| I ring through to Bravo and ask them to reschedule a the
| flight as is required under EU law. No problem sir we are
| into it. I think nothing of it. 5 days pass. No email and
| my booking has not changed.
|
| I ring again. Why is this taking so long. I was rudely
| informed to be patient as the "relevant department" ( note
| this term ) is processing it and it takes some time.
|
| 10 minutes later I get an email from bravo. All my flights
| are cancelled.no to information is provided about the
| reschedule.
|
| I find their webchat app and get in touch.
|
| "How can I help you sir?" Starts the conversation which
| quickly goes downhill. The man informs me that Bravo is not
| responsible for rescheduling the flight. My contract is
| with Singapore airlines. "Have a nice day sir"
|
| No no no and no....I argue with him for over an hour.
| Eventually he agrees to escalate and then hangs up on me.
|
| I try to contact Singapore airlines but they tell me to go
| back to Bravo. It's their ticket booking.
|
| A day later I call back to Bravo and ask them the status.
| They just stonewall me. Everything is handled by the
| "relevant department" and I will get an "email as soon as
| possible" They refuse to divulge any information.
|
| They start pressuring.me to cancel. They promise me a full
| refund. I say no I want a reschedule. "Ok sure but you will
| have to wait for the RELEVANT DEPARTMENT."
|
| This is nine days before I fly. I've waited now 6 days for
| any actionable information from Bravo. Nothing comes.
| Eventually I give in..I book a new flight direct with
| Singapore airlines.
|
| I contact the bravo chat again and ask them to cancel. "Ok
| sir but we can only refund you the part of the ticket that
| was cancelled". That is 1/4.
|
| I explode..I post the chat log I'd recorded from yesterday
| showing that I'd been promised a full refund. "Yes sir ...
| Of course sir.but there will be a 35 euro handling fee"
|
| No the fuck there won't be I responded and posted the
| recorded log where I'd explicitly the day before asked
| about handling fees and were promised there would be none.
|
| I asked when I should expect the refund. "I've notified the
| RELEVANT DEPARTMENT and they will contact you as soon as
| possible"
|
| At this point I realise their business strategy. They can
| offer cheaper flights because when everything goes well the
| customer gets the flight. If however the airline cancels
| one flight Bravo can then dick the customer around and
| attempt to find excuses not to pay up.
|
| I somehow doubt I will get much of the 1000 euros out of
| them they owe me.
| saiya-jin wrote:
| That's... a bit extreme even for my experience, but I
| guess 4 legs and bad luck can do this to you, max I've
| ever done was 3 (and they lost my big luggage for a week
| without any info about it but that's another topic).
|
| But yes that's exactly why we buy directly. Compare it to
| our trip to Bolivia via Miami few years ago. Come to the
| airport, do you have US ESTA visa? Nope what is that? We
| dont' travel to US so don't know its policies, just want
| to fly to Bolivia. Yeah but you go via Miami, its not
| secured airport unlike most airports anywhere, you need
| full tourist US ESTA visa. OK we go to airlines helpdesk
| (British airways) by their recommendation, they do quick
| ESTA for us based on our passports.
|
| All good, we fly to London, but then flight to Miami is a
| no-go at the gate, can't find our ESTA code. Some US
| personnel on the airport in Heathrow found out the person
| who made ESTA selected incorrect country in our
| application. 30 minutes to departure. Sorry no-go.
| Straight on the airport within 20 minutes we got free
| tickets for same flight next day and other remaining leg
| and did ESTA correctly ourselves.
|
| I have few similar stories, but they all point to the
| same conclusion - its not worth the extra risk,
| especially if there are more legs and multiple airlines
| are involved. It all looks nice till first cancellation
| happens. The amount of frustration and stress can easily
| ruin any mental benefits of (usually quite costly due to
| 4 of us) vacations.
| notahacker wrote:
| I can add a bit of clarity to that. When you book
| connecting flights direct with an airline, or with that
| airline's codeshare partner, or with an authorised
| reseller, you've got _one ticket all the way through_
| which the airline is obliged to fulfil by getting you to
| your end destination or pay expensive compensation. If
| they cancel part of the flight, they might have to get
| you to your end destination on a different route,
| possibly with a last minute ticket on a different airline
| (which is very expensive... for _them_ )
|
| When you book with Bravofly and equivalent, they book
| separate tickets for each leg with no promise of
| connection. That's how they get the cheapest possible
| fares. In the event of a cancellation of one of the
| flights the airline is obliged to offer you a rescheduled
| ticket between two destinations, but has no obligation to
| ensure the passenger gets from the start point to the end
| point of the original itinerary. So none of the
| alternative tickets SIA was obliged to offer Bravofly
| were any use to you. Bravofly don't have any obligation
| to reroute you either and even if they cared about
| goodwill I doubt their margins are big enough for them to
| volunteer alternative flights at their own expense.
|
| Or put another way, I booked a cheap flight back to
| London via Zurich on their airBerlin's website. Couple in
| front of me booked the same route via Bravofly (as two
| separate tickets) for about PS5 less. When airBerlin
| decided to cancel the flight to Zurich without telling
| some of their passengers until they arrived at the
| airport I got back to London around when I'd originally
| expected at airBerlin's expense on a better airline on a
| different route. The other couple got told they could
| have a flight to Zurich later that day if they still
| wanted it, but they'd miss the other flight back to
| London without compensation regardless. Or they could
| ring Bravofly and see if they'd help...
| injidup wrote:
| I'm not sure this is the case as I actually have a valid
| SIA booking number and single SIA ticket number. I can
| verify this on the SIA android app.
| sokoloff wrote:
| Long before the point you're at, I'd have let my credit
| card company know to charge back that transaction and the
| details why. (I do give companies one solid effort to
| correct things on their end.)
| injidup wrote:
| I've submitted all that information today to the credit
| card company along with the chat logs.
| nathancahill wrote:
| Absolutely. I search for flight legs on ITA Matrix and then
| book the specific itinerary by calling in with the flight
| code. Generally get the exact flights, schedule, class,
| seats etc. ExpertFlyer is worth it's weight in gold.
| atyppo wrote:
| Yes, this is generally true, but not always (although this
| is definitely an outlier). JFK-SCL was $1200 cash through
| the airline or $287 through a travel agent. Guess which I
| chose?
| mfringel wrote:
| A key differentiator is that airline seats are a perishable
| good.
|
| That is, an empty seat has value until the plane takes off, at
| which point the value goes to zero. On the flip side, a
| traveler has an opportunity to _be_ in that seat until the
| plane takes off, at which point its value is zero. People tend
| to understand that those values continuously vary with time,
| and so the price will vary with time.
|
| To contrast, books (in specific) and consumer durables (in
| general) are not perishable goods. The notable exceptions tend
| to be time-based; try getting chocolates in the heart-shaped
| box right before Valentine's Day in the US... and then the day
| after. Since the value of the book doesn't continuously vary
| with time over the short-run, people don't expect that the
| price will vary.
| ccalloway wrote:
| Tickets for the theater and for concerts are also generally
| sold for considerably below the price that the market will
| bear, with enormous effort put into ineffectively preventing
| resale, despite the tickets being 'perishable' in your sense.
| colinmhayes wrote:
| Tickets generally are dynamically priced. If a ticket has
| high demand it will instantly sell out and be put up for
| auction on resale sites.
| ccalloway wrote:
| By this definition everything that can be resold is
| dynamically priced.
|
| The GP was trying to explain why airline tickets, but not
| consumer goods, are dynamically priced when sold _by the
| original vendors_.
| verall wrote:
| Other comments are also explaining; but in the modern day
| concert tickets _are_ dynamically priced, with stubhub
| (owned by) and ticketmaster set up to be the "bad guy".
|
| Popular concerts sell out very fast and are immediately
| being sold on stubhub. Not all of these tickets sold on
| stubhub are actual resales by consumers or scalpers, but
| are typically mass purchases negotiated by ticketmaster
| ahead of time.
|
| Superfans glued to artist social media will get special
| promo codes which unlock tickets that are not otherwise
| available. This makes sense because they are the most
| likely to spend the difference on merch.
| colinmhayes wrote:
| Most goods that can be dynamically priced are dynamically
| priced. The thing is that most goods are not supply
| constrained. When there is competition and an unlimited
| supply people will just pretend they have a lower
| willingness to pay so dynamic pricing doesn't really
| work.
| ccalloway wrote:
| This does explain why Playstations are not dynamically
| priced, but it fails to explain why concert tickets are
| not dynamically priced.
| ghaff wrote:
| As I recall from my economics, one of the usual theories
| is that bands/venues/sports events/service stations in
| remote locations/etc. don't in the main want to gain the
| reputation for being the a*holes who will rip you off
| given the slightest opportunity.
|
| It's at least possibly bad for long-tern business. And in
| the case of small businesses, the owners may just not
| want to be that person.
|
| For events, "list prices" are often gotten around by (in
| addition to ticket brokers being a thing) by various
| types of VIP seating, extras, and so forth which raise
| prices to closer to market levels while leaving normal
| ticket list prices--assuming you can get one.
| [deleted]
| kingbirdy wrote:
| Concert tickets _are_ dynamically priced, at least for
| some events. See Ticketmaster's "Official Platinum"[0]
| which is a dynamic pricing system for the best seats, I
| imagine other companies have something similar.
|
| [0]: https://help.ticketmaster.com/s/article/What-are-
| Official-Pl...
| mdavis6890 wrote:
| I think the difference in the Amazon example is that it's about
| you as an individual, rather than general market circumstances.
|
| I think most of us are okay paying a surge rate to Uber when
| it's raining at the ballpark (market circumstances), but not
| just because you are on the way to the hospital (personal
| circumstances).
| eganp wrote:
| Never thought of this distinction before! Thanks for making
| this distinction.
|
| This seems to hold in other contexts. People tend to tolerate
| price discrimination at an aggregate level (e.g.
| senior/student discounts) but loathe individual-level price
| discrimination (e.g. college tuition). I wonder if it's the
| unfairness or uncertainty
| atyppo wrote:
| This already happens on an extent on Delta's website. I've had
| it happen multiple times where I receive a higher upgrade offer
| price than others traveling with me on a separate reservation.
| Other times where even the price of the ticket is different,
| despite vehement denial from someone in Ed Bastian's office.
| Hence I frequently use incognito and change my VPN's location
| to search and get cheapest mileage-based offers since this
| isn't searchable on Google Flights. Quite scummy to think
| they're offering higher prices to their more loyal customers (I
| travel about 50k miles/yr on Delta). Makes me want to become an
| airline free agent since I'm in NYC and can get direct flights
| pretty much anywhere.
| tandr wrote:
| Yeah... Problem is they control supply as well. I would agree
| with the conclusion only if I would fly business destinations
| only. As it stands right now, I have to buy tickets to Mexico 6-8
| months in advance, with no right to cancel them, even if life has
| other plans all of a sudden.
| mdavis6890 wrote:
| Someone has to take the risk that life happens. You can take
| that risk (non-refundable) or you can pay the airline a higher
| price to take that risk (refundable).
| mirchiseth wrote:
| Thinking in terms of risk and who bears it is the right way
| to think. Thanks for bringing this up.
| blunte wrote:
| But is the extra cost you pay (for that risk) fair relative
| to the risk of revenue loss for the airlines? I highly doubt
| that.
|
| This is an industry that has a history of ever-increasing
| executive pay rates with gradual reductions in service
| quality, gradual increases in incidental fees, frequent
| bankruptcies, and occasional governmental bail-outs.
| ccalloway wrote:
| It bears no relation to the risk of revenue loss for the
| airline. It is based on demand. An airline runs hundreds of
| flights a day, and it knows that a certain percentage are
| going to be less than full. It tries to optimize as best it
| can. You on the other hand are going to be seriously
| annoyed if you have to change your plans and you lose
| hundreds of dollars, maybe a significant proportion of the
| money you have for your trip. They are going to charge you
| based on the price you're willing to pay for peace of mind,
| far lower than the cost to them. After all, most people do
| use the plane tickets they have booked.
|
| The solution is to self-insure by having $1000, or
| whatever, ready for if you need it for increased travel
| costs or other emergencies. And try to avoid feeling either
| anger or regret if you have to change your plans. If you
| don't have a spare few hundred bucks then this method isn't
| available to you.
| mirchiseth wrote:
| Risk and insurance go hand in hand. +1 on self-insurance
| says the guy who is buying 22/23 season passes for
| skiing.
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