What is the type of price discrimination being practiced by the frequent flyer programs used in airline industry
The type of price discrimination being practiced by frequent flyer programs in the airline industry is known as "third-degree price discrimination."
To understand this, we first need to understand what price discrimination is. Price discrimination refers to the practice of charging different prices for the same product or service to different groups of customers. In the case of frequent flyer programs, the airlines offer different prices for their flights to customers based on their level of loyalty or membership in their frequent flyer program.
Now, let's specifically focus on third-degree price discrimination. Third-degree price discrimination involves charging different prices to different groups of customers based on their willingness to pay. In the case of frequent flyer programs, airlines offer discounted prices or special deals to their loyal or frequent customers who are members of their frequent flyer program. These customers are often willing to pay a higher price for certain benefits or privileges such as upgraded seating, priority boarding, excess baggage allowance, or access to airport lounges.
To summarize, frequent flyer programs in the airline industry practice third-degree price discrimination by offering different prices to different groups of customers based on their loyalty or membership in the program.