http://www.ryanaircalendar.com/?partner=CALENDAR&pos=HOME_CDAY

The demand side effect you mention definitely exits though which is why prices for a specific flight will rise as you get closer to the departure date. However, once you are getting to hours before the flight you would expect to see prices plummet as the “bums on seats effect” starts to dominate.

Apparently Tim Hazeldine from Auckland Uni has done some empirical work which documents this type of pattern overseas (Canada I think?).

If you have to go somewhere unexpectedly you may be willing to pay more, but conversely seats might stay empty because last minute bookings are more expensive.

Airlines used to offer student stand-by fares which were half price. The risk was you might not get a seat because you only knew if you had one at the last minute when half a fare was better from the airline’s point of view than none. But if you didn’t have to be somewhere urgently the savings justified the uncertainty.

The price discrimination could certainly work both ways. I really don’t know enough to know which way it would go. I guess the email that we got suggests that it may not be amenable to such simplistic analysis.

However, the article only said that finding the cheapest fare is tough, not that the construction of the initial system is complex. Perhaps we can infer somethign about the elasticities from this pricing.

Rahul:

I certainly hope it’s not all based around creating inconvenience for me, but it does often feel like it! Thanks for commenting and reading our blog 🙂

Anyways – you have a great blog here I am a regular reader – good stuff!

Its best not use any sophisticated algorithms and simply go with 2 or 3 level structured fares.

The current pricing depends on creating inconvenience for customers who are paying less.

It should be other way – incentivising customers who are helping me (airlines) fill capacity!

For some customers these aren’t good substitutes so they may have themselves a fairly inelastic demand curve. In this case wouldn’t we see airlines charge different prices in order to price discriminate between passenger types?

If you are planning a trip significantly in the future, then you are much less dependent on time and more dependent on comfort. A longer stop over of a few days is more comfortable, hence you are willing to pay more for it.

The arguments you have offered are for the inflexible business traveller who has to leave short term, and doesn’t desire a long, or any stopover at all.