Assume each airline different, but they clearly track each others’ prices, and certain market dynamics/forces/availability levels seem to cause the algorithms to get derailed into nonsense land. Ex: I am looking at flight from between two cities 1000km apart. a month from now i see $159 dollar flights. looks like average in the 200s. this week, two airlines both show options tuesday and thursday. Airline A, tues nonstop economy: $1500 (lol), B $1300. thursday A: $670, B: $590.There is just no way anyone is buying for 1500 right? are there people out there (that can’t afford private) but hate money so much they are spending 1500 on a one hour flight? or do runaway algorithms actually cost airlines sometimes?
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Imagine you go to the park with 10 popsicles that you plan on selling for 1 dollar each to make $10 dollars.
2 people offer you $2 for a popsicle, because they don’t know you were only going to charge $1. Now you’ve got 8 popsicles left.
Then you sell 6 more popsicles for $1 each.
The good news is that you made $10! The bad news is that 2 of your popsicles melted and you didn’t make any money off of them, and now they’re gone forever.
Next time, you might be willing to sell those last popsicles at $0.50 each, and would be happy to make any money off them and not let them go to waste.
Airlines figured out a long time ago that a seat on a flight is perishable.
Once the flight is over, that seat and any money you could have made from it is gone forever.
Airlines would rather make some money on every single seat, than have any seats perish without making any money. So they sell the best seats at the highest prices, then the moderate seats at moderate prices and then finally they sell any unsold seats for as much as they think they can get away with.
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