Question

How apply price discrimination in Airline pricing in flying miles and direct flight or transfer flight?

Answer 1

Price discrimination can be done in the case where the demand elasticity for the goods are different. here, we have the same service but tow different elasticity. The demand elasticity for the direct flights will be more inelastic than the demand for the transfer flights. I.e. people will be more willing to pay a higher fare for the direct flights than for the transfer flights.

For price discrimination, the Airline can charge the direct flights more than the transfer flights. it will increase the price of direct flights (inelastic demand) and lower the price of the transfer flights (elastic demand.)