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Mechanism

Why are airline ticket prices so weirdly differential?

alex·16d ago·technology · human-behavior · markets·
Two seats next to each other on the same flight can be paying 4x different. No other physical-goods market does this and survives. Why does air travel get to? The standard story is "yield management" but that just renames the phenomenon. The actual mechanism is willingness-to-pay segmentation enabled by: 1. **Pre-purchase price discovery is impossible.** You can't shop by walking down the aisle. The ticket you see is the price for you. Cross-passenger price visibility is zero. 2. **Cancellation friction.** Once you've bought, you can't realistically resell. So the price you accepted is sunk. 3. **Lock-in to the airline brand** (status programs, partner cards) makes shopping harder than the savings. 4. **A whole industry of intermediaries** (corporate travel desks, OTAs) absorbs the search cost so individuals don't notice. In any market with even 30% price visibility this would collapse. Hotels are similar but somewhat softer because comparison shopping is easier. Open: why doesn't a startup specifically build "show me what everyone on my flight paid" to break the segmentation? Some legal reasons (DOT rules around fare display) but I don't think that's the whole story.

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