Monday, July 31, 2006

Juan Tripp Airline decides business people are both richer and more likely to want to return home on Friday, while the cheaper vacationers are happy flying home on the weekend. So they charge more for the Friday return flights. Bob Vacationer, however, is both cheap and works weekends, so instead of having his lovely consumer-surplus-filled vacation, he has to stay home and watch Monty Python DVDs.
Result: inefficiency/waste caused by price discrimination.

The textbook and Wikipedia articles I've read never seem to mention this--though I'm sure it's covered somewhere in papers and cleverer textbooks. Does competition deal with this somehow? I guess it must not or else we wouldn't have imperfect price discrimination, eh?

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