The author Rory Sutherland is vice-chairman of Ogilvy Group UK.
I don't think we want the ad guys determining the pricing structure for airlines. Anyway, the reason for the wacky pricing on airfares is not some sort of implicit agreement to be socialistic about it. It's because the fixed costs associated with the flight are so high. It costs virtually nothing to add another person to the flight. Airline fares are a dance between filling up the flight while maximizing the average fare per seat. Price too high and you fly with empty seats. Price to low and you fill up but leave money on the table.
Odd sort of ad-hominem. The pricing structure of airlines certainly wasn't determined by ad execs. What he points out is that it isn't so bad: it does much better at maximizing utility than having all the seats the same and most of them more expensive.
His point was that if the airline pricing system is not so bad (and I'm not agreeing with that), then having it apply to other high fixed cost, low marginal cost things--like his daughter's bus--might also not be so bad.
Of course, the example of his daughter's bus makes me wonder if the whole thing isn't tongue in cheek and I'm not getting it because I'm not British.
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The author Rory Sutherland is vice-chairman of Ogilvy Group UK.
I don't think we want the ad guys determining the pricing structure for airlines. Anyway, the reason for the wacky pricing on airfares is not some sort of implicit agreement to be socialistic about it. It's because the fixed costs associated with the flight are so high. It costs virtually nothing to add another person to the flight. Airline fares are a dance between filling up the flight while maximizing the average fare per seat. Price too high and you fly with empty seats. Price to low and you fill up but leave money on the table.
Odd sort of ad-hominem. The pricing structure of airlines certainly wasn't determined by ad execs. What he points out is that it isn't so bad: it does much better at maximizing utility than having all the seats the same and most of them more expensive.
His point was that if the airline pricing system is not so bad (and I'm not agreeing with that), then having it apply to other high fixed cost, low marginal cost things--like his daughter's bus--might also not be so bad.
Of course, the example of his daughter's bus makes me wonder if the whole thing isn't tongue in cheek and I'm not getting it because I'm not British.