You should be EXTREMELY CAREFUL when using this strategy. It is, at a minimum, against airline policy.
If you have any kind of airline status or membership, and you do this too often, they will cancel it. If you try to do this on a round-trip ticket, they will cancel your return. If the airlines have any means of making your life difficult available to them, they WILL use it.
Obviously you also cannot check bags when using this strategy, since they will go to the wrong place (your ostensible, rather than your actual, destination.) This also means that if you have an overhead-sized carryon, and you board late and are forced to check it, your bag will NOT make it to your intended destination; it will go to the final destination marked on your ticket. If you try to argue about this, you run the risk of getting your ticket cancelled altogether, since you're violating airline policies by using a ticket in this way.
EDIT: Since I'm top comment, and since other people in this thread are making moral objections, I want to clearly state that I have no moral objections to this whatsoever. My objections are purely based on risk to the user.
Some of the costs you list can be avoided, and others aren't as high as you imply. If you oppose this strategy on moral grounds for violating airline policy, that's fine, but I suspect that this opposition is causing you to believe that the self-interested reasons against it are stronger than they are.
See this Wikipedia article for a more balanced discussion of this strategy, and a list of other airline booking ploys.
I do not oppose it on moral grounds, but it cannot safely be executed by someone who is not at least moderately familiar with air travel mechanics, and people who are sufficiently familiar generally already know about it. So offering it as a "great tip" without mentioning that there are risks is a really hazardous thing to do.
EDIT: I would say that my opposition to it (for my own use) is based on the perceived risk/reward ratio being terrible. For someone who doesn't have a lot of money, and doesn't mind doing a lot of reading to carefully understand the risks, OR doesn't mind occasionally getting hit with serious downsides (like losing your luggage for an extended time), I think it can be a great strategy. But the risks on the downside are both significant and unexpected if you aren't warned about them. (Cancellation of connecting flights or temporary loss of luggage are very significant downsides if they happen to you without warning.)
In addition to all the direct, personal-consequence issues mentioned by gwillen as to why you shouldn't do this, there are also knock-on effects for other people. For example, if enough people do this on a specific route, it can lead to the price changing for everybody, or to the airline dropping the route altogether. (Leaving other people worse off as a result of your actions.)
This is because there's a reason these weird fares exist, and it's to compete with direct flights provided by other carriers, to pick up business they wouldn't otherwise get. When you skip out on a flight midway, you remove the airline's economic incentive to offer the reduced fare in the first place. As with stock market strategies, this makes such techniques anti-inductive: they will only work so long as few or no people actually use them.
If you know about an anti-inductive loophole in a system, the last thing you should do is advertise its existence or promote its use, unless your intention is to get rid of the loophole. (And if getting rid of the loophole hurts other people as a side effect, then perhaps it's not such a good idea.)
Can you comment on whether the existence of the loophole does or does not indicate that the airline is charging more than it needs to / why the destruction of the loophole does or does not eliminate some sort of market inefficiency and/or undermine a price gouging strategy?
My intuition says that loopholes like this aren't supposed to exist in an idealized model of an efficient market, but I haven't properly worked out any reasoning either way so I am curious if someone has. I can't see any moral objection either way to using price gouging or destroying price gouging either way and just see them as strategies, and eliminating market inefficiencies seems like a positive.On the other hand, breaking contract in general breaks the rules for an idealized market, so I'm open to the idea that a true harm exists.
So if there is a harm...what precisely is the nature of the harm? And can we show that there isn't a benefit / the existence of whatever mechanisms allow this loophole to exist aren't a harm?
Can you comment on whether the existence of the loophole does or does not indicate that the airline is charging more than it needs to / why the destruction of the loophole does or does not eliminate some sort of market inefficiency and/or undermine a price gouging strategy?
I've bowed out of the thread as a whole, but since this is a technical question and not a moral one, I'll go ahead and reply. ;-)
First, a bit of background. Under standard cost accounting assumptions, you can say that a seat on an airplane "costs" a certain amount, based on taking the total cost of staffing, maintenance, fuel, etc. Each of these cost allocations is largely arbitrary, however: the truth is that the airline has certain fixed and variable overheads, period, and if the flight is happening at all, the vast majority of those costs have nothing to do with how many people actually travel on the flight. But let's say that we arbitrarily assign costs equally for every seat on the plane, and call that the "fair" price.
(Or, more precisely, the "equal cost allocation" or ECA price, since this "fairness" is just a System 1 intuition that breaks down under closer inspection.)
If airlines asked the ECA price for every seat on every flight, it would be a fairly high amount. This would be more "fair", under some intuitions, but would result in lots of travel not happening at all. People who found the ECA price too high for their intended use, would not buy the ticket. This would result in ECA prices rising, because the airline still has fixed costs for the flight as a whole. When we divide those costs by the (new, lower) number of people actually flying, the cost goes up. Indeed, the airline has to charge an amount that's enough to cover the flight if only a few people show up, or it has to have the option to cancel the flight as underbooked, or it has to offer fewer flights to raise the demand for each flight.
Now we have a market inefficiency:
Under this condition, everybody loses!
Price discrimination solves this problem by decoupling "price" and "cost". The truth is, there is no such thing as how much a seat on a plane "costs": the allocation of fixed overheads and flight overheads is arbitrary and made-up. What really matters is the total revenue brought in by the flight. Our ECA price is a fiction, and discarding that fiction allows us to offer better prices for everybody.
As long is there is some way for the airline to sell at different prices to different people, they can get closer to selling out their flights, by offering the ECA price only on average, rather than by asking everyone to pay it. A business traveler who could afford an ultra-high ECA will actually pay less than under the inefficient-market ECA condition, because the flight is full of vacationers paying smaller amounts to make up for the difference. The vacationers get a lower-than-current ECA price, because there are business travelers making up the difference (though still not paying the inefficient-market ECA price).
This is why the airlines have all the weird fare rules, like roundtrips being cheaper if they cross over a weekend. It's why they want the name of the person traveling, and charge for changes. These are all things designed to separate vacationers from business travelers, so that the plane can be filled and the costs all covered.
The problem is, if business travelers succeed at pretending to be vacationers (e.g. by using half of a pair of round-trip tickets, or wrapping round trips so as to create a fake weekend stayover), then the flight fills up, but at a below-current ECA price. The airline loses money, because they can't make up in volume what they're losing on every seat. That's why they have all sorts of gotchas and enforcement on these loopholes.
Unfortunately, human beings' System 1 intuitions tell them that if somebody is paying $X for a seat, then that must be the "fair" price for any seat on the plane, and that the airline ought to charge everybody that price. So the fare rules are widely despised, even though the result of not having them would be everybody paying a higher price, for fewer seats on fewer flights, if they can fly at all.
Anyway, the specific loophole discussed in this article ("Hidden city ticketing", per Wikipedia) doesn't come from this particular form of price discrimination. It's a different form that basically is done to compete with airlines offering direct flights between two cities, A and B. The airline offering the deal seeks to serve A<->B passengers without adding a direct flight, by using excess capacity that's available on the A<->C and C<->B routes. The airline can offer these seats below the A<->C ECA, because it expects not to fill them with other A<->C or A<->Wherever passengers anyway.
The problem is that if lots of people who were paying something close to the full-flight ECA price for an A<->C ticket, now switch to using hidden city ticketing, they are now losing the airline money on the A<->C flight, because there are more people paying less, instead of some people paying more and others paying less. The airline now has to start raising the direct A<->C price in order to make up the difference, creating more price instability.
tl;dr: Price discrimination is efficient in a market sense, even though it often feels "unfair" to System 1 (because different people are paying different prices for the "same" thing), thereby motivating people to try to work around the discrimination. But successfully working around the discrimination increases the actual unfairness, since the price you get is now discriminated in part by how much extra work you're willing to do to game the system, and because the business is then motivated to make things more discriminatory or is forced to change what offerings it makes available.
(This is what makes loopholes anti-inductive and the use of loopholes a prisoner's dilemma "defection", because you are defecting against your fellow consumers in a game where if everyone defects, everyone loses. That's why talking about such a loophole is so foolish: you are encouraging more people to defect, which reduces the number of co-operators whose cooperation you're exploiting. Even assuming you're going to defect in a PD game like this, telling other people about it is probably the stupidest thing you can do, from a game theory/policy perspective, and that principle applies to a lot more things than airplane tickets.)
Thanks for answering!
This does fall under "price gouging" just as I suspected (though you use the more morally neutral term "price discrimination", which I aught to have used but I didn't know the term. Price discrimination is not unethical. However, I'm not certain that avoiding price discrimination is unethical either.
Price discrimination operates in coffee shops too - most of the cost is the building and the employee, and the actual drinks don't really effect anything - the differential pricing of the drinks is price discrimination. Similarly at the grocery store, using coupons is price discrimination - only people who put in the time and effort to use coupons pay less, and people who don't use coupons subsidize that. Would it be unethical to have a device that automatically generates coupons for everything? It certainly "defects" in that it raises prices for everyone and lowers prices for yourself.
...yet, it's not the same thing, because you did sign a contract with the airline to take the entire flight, not to mention the empty seat. It is morally gray to break contract. I do find it ... counter-intuitive ... to morally chastise defection strategies fighting price gouging on the part of consumers, because of how incredibly often businesses defect against consumers. Businesses break unenforceable contracts constantly, so it's hard to be persuasive when appealing to the "little guy" consumer's honor against the airline industry as a whole.
Unenforceable contracts in general create an incentive structure (What Yvain describes as "Moloch") where defection means winning and cooperation means losing. I haven't yet determined my position on whether or not moral people aught to allow themselves to lose within incentive structures rewarding immorality... on one hand, morality means being willing to lose self-interest to win community interest, but on the other hand this stance naturally causes moral people to lose and immoral people to win, and that shifts the good-evil power balance in a dangerous way. (I realize that's a really simplistic way to put it).
I'm curious as to whether you in-general support that "moral" people should allow themselves to lose and cede power to those who are willing to be "immoral" in these incentive structures, although I suppose you've tapped out on discussing the moral aspects on this.
In any case, I guess the upcoming court case will soon decide whether or not these contracts are enforceable, and that avoids the philosophical debate.
This does fall under "price gouging" just as I suspected (though you use the more morally neutral term "price discrimination",
These aren't synonyms. "Gouging" implies that somebody is raising prices in order to make extra profit than the usual. Price discrimination is generally someone lowering prices to a market segment in order to pick up extra business, without lowering all their prices, in order to get the advantages I described above. AFAIK, the airlines didn't actually raise their rates when they were deregulated -- they lowered some of them to get more business. (I could be wrong about that though.)
I do find it ... counter-intuitive ... to morally chastise defection strategies fighting price gouging on the part of consumers, because of how incredibly often businesses defect against consumers. Businesses break unenforceable contracts constantly, so it's hard to be persuasive when appealing to the "little guy" consumer's honor against the airline industry as a whole.
I think it's a mistake to think this is a you-vs-the-airline scenario, precisely because the airline has more power than individuals. The airline can't be forced to do business at a loss, which means that non-cheaters will -- one way or another -- be paying to subsidize the cheaters. (Whether it's in higher cost or lower availability.)
Price discrimination is generally someone lowering prices to a market segment in order to pick up extra business, without lowering all their prices
That's not the standard definition. Price discrimination is all about capturing consumer surplus as revenue. See e.g. Wikipedia:
The purpose of price discrimination is generally to capture the market's consumer surplus. This surplus arises because, in a market with a single clearing price, some customers (the very low price elasticity segment) would have been prepared to pay more than the single market price. Price discrimination transfers some of this surplus from the consumer to the producer/marketer.
Those look equivalent; one is defined in terms of intention, and the other in terms of mechanism.
Those look equivalent; one is defined in terms of intention, and the other in terms of mechanism.
Pretty much. Except that the type of discrimination I've been discussing is capturing low end surplus, by making use of a seller's excess supply that would go to waste unsold at a higher price. For example, if a factory can produce X many widgets a month, but the market will only support Y widget sales at their full price, then they can sell X-Y widgets at any price higher than the truly variable costs (i.e., consumables only) and receive the difference as pure profit. This is extremely lucrative for the company, and benefits consumers who would or could not have bought the widgets at the higher price. But it only works if the company can prevent its full-price buyers from getting them at the lower price.
And every real-world example of price discrimination I know of works like this. Coupons, loss-leaders, rebates, special fares, sales, closeouts, last-minute vs. advance prices, factory outlets/seconds... heck, I just saw a real estate agent's ad offering to sell your house at no commission... if you use him to buy your next house. Granted, that's not exactly a tiny market segment, and is probably a bit more like a specialization than it is true price discrimination.
Anyway, the idea that a business raises prices to squeeze more money out of a select group is mostly silly; only a poorly managed business would establish its going rate any lower than what the top end of the market can bear in the first place! Ergo, any other prices offered for the "same" widgets are going to be lower, and any new higher prices will be justified by added value in the new offering, or else the market won't pay the higher price.
(Absent monopoly power, of course. Comcast keeps raising the rental rate for its modems, for example, without providing any new benefits. And that is price gouging, not price discrimination. In a market with real competition, you can't price discriminate by raising prices for a select group without some sort of justification, if you want to keep making sales to that group.)
And every real-world example of price discrimination I know of works like this.
That might be availability bias, though. If you deliberately try to not waste money, you're probably avoiding many of the ways that you can price discriminate up. Software as a service has many examples of price discrimination the other direction; here's Patrick MacKenzie on the subject. (It's a recurring subject, there might be a better place to jump in, but that'll get the idea across.) Many people in companies are willing to pay 10X in order to say they're getting the Enterprise version of software instead of the Hobby version of that software, even if the hobby version covers their use case entirely, for signalling reasons.
Software as a service has many examples of price discrimination the other direction
As I said, if you charge somebody more for something, there has to be some added value. Making a deluxe or enterprise version of something where the customer freely chooses to pay more for the extra goodies isn't price discrimination, as I understand the term. That's just "having a range of products".
To be price discrimination, you need to be offering something that's substantially the same, but you want to get more business by not selling it at just one price. Airlines, coupons, etc., as I mentioned above.
You can quibble whether this is the "true" definition of price discrimination, but at that point we're arguing the meaning of words. This is what I mean by price discrimination in this discussion. I consider raising prices without adding extra value to be either "monopoly price gouging" or "correcting your dumb mistake of not charging enough in the first place". ;-)
Many people in companies are willing to pay 10X in order to say they're getting the Enterprise version of software instead of the Hobby version of that software, even if the hobby version covers their use case entirely, for signalling reasons.
Enterprise versions of software generally come with support contracts or SLAs, not to mention features that require more support (such as API access, single sign-on, integrations, etc.) that justify the higher price because they come with higher ongoing costs for the service provider.
Even if the software itself is otherwise identical, an enterprise offering is different, speaking from having personally been on both sides of that particular business. Even if most of the "enterprise" users don't actually end up needing that extra support on a regular basis, it's a legitimate added value to have the protection of choosing the more expensive plan that comes with those guarantees. They're basically paying more for the option to get more help when they need it, or to sue you if something goes wrong.
But even if it were entirely for signaling reasons, that still wouldn't make it price discrimination. It's the buyer's choice whether to take a lower-priced offering, and if the seller adds an enterprise package, it's usually not because they're trying to squeeze more money out of customers they already have. They're doing it because they wouldn't get the enterprise customers at all with their existing offer. (It'd be price discrimination if they needed some way to prevent the enterprise customers from buying the hobby offering.)
While SaaS and PaaS vendors may also have price-discrimination offerings in their lineups (closeouts, old servers, "free" tiers, etc.), their mainline plans are usually priced so that the vendor is indifferent to which pricing plan you buy: they're making a decent living even if everybody picks just one plan, whether it's the lowest or highest priced one.
Again, "price discrimination" as I'm using the term is something used to eke additional revenue out of excess supply without destroying your ability to get your regular price for your regular supply. Merely having a range of products isn't. Even Wikipedia says:
Price differentiation is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy
This is a bit tricky, because as I explained earlier, "production cost" is a bit of a chimera, due to the question of allocating fixed costs and semi-variable costs. But if you offer an enterprise package with support, you have to pay for some extra support staff capacity just to have them available in the event that this is the month the customer decides to use it. Few of a business's production costs are truly variable, unless you're somebody like Uber, who can instantly hire/fire their drivers. (And they still have lots of fixed and semi-variable costs.)
Anyway, the point is that most SaaS/PaaS companies' pricing tiers are based on varying costs between the tiers, which makes them product differentiation, not price discrimination per Wikipedia.
That being said, the Wikipedia article is actually pretty vague about the distinction at times and notes that only "some" economists argue that signaling premiums make something price discrimination rather than product differentiation. My personal opinion is that perceived value, not "production cost" forms a relatively bright line between price discrimination and product differentiation. If the buyer considers the higher-priced product more valuable, IMO that's product differentiation. If they consider it the "same thing" (e.g. DVDs, airline flights), it's price discrimination.
As I said, if you charge somebody more for something, there has to be some added value.
I think this is symmetric, though. The 'added value' of paying the non-coupon price is that you get the time you would have spent managing coupons and to conspicuously consume non-coupons; the 'added value' of paying the enterprise price is often just the conspicuous consumption of non-hobbyism. But if I want coupons to represent price discrimination, then it makes sense to see the enterprise tier as also price discrimination.
And if we use the 'capture as much consumer surplus as possible' definition, both of those are clearly serving the same general function.
Anyway, the point is that most SaaS/PaaS companies' pricing tiers are based on varying costs between the tiers, which makes them product differentiation, not price discrimination per Wikipedia.
The Kalzumeus response to this is that it leaves immense amounts of money on the table to sell software based on varying cost rather than capturing consumer surplus by price discrimination. When he sells Appointment Reminder, he encourages people to pick a tier based on the cost of one missed appointment rather than based on their particular needs (i.e. the cost of serving them).
When he sells Appointment Reminder, he encourages people to pick a tier based on the cost of one missed appointment rather than based on their particular needs (i.e. the cost of serving them).
It's insanity to ever ask a buyer to value a product based on your cost; that's like an elementary principle of business. But there is a difference in cost, in that in the article you linked, the author talked about 25 extra hours of work he put in just to land that enterprise deal. That is a different cost of the offering, and has to be priced in.
if we use the 'capture as much consumer surplus as possible' definition, both of those are clearly serving the same general function.
There are LOTS of ways to "capture as much consumer surplus as possible". Marketing and sales, for example, are the process of communicating the benefits of your product to a customer in such a way as to make them willing to pay more -- thereby capturing more of their surplus.
Well-run business are always trying to capture as much consumer surplus as possible, so that's not a differentiating factor for what makes something price discrimination, IMO. The portion of consumer surplus a business captures is called profit, so if you're not trying to capture as much of it as you can, you're probably doing something wrong. ;-)
I think this is symmetric, though. The 'added value' of paying the non-coupon price is that you get the time you would have spent managing coupons and to conspicuously consume non-coupons; the 'added value' of paying the enterprise price is often just the conspicuous consumption of non-hobbyism. But if I want coupons to represent price discrimination, then it makes sense to see the enterprise tier as also price discrimination.
The difference is that in the case of the coupons and most other discounted offers, the differentiation is acheived by making a worse product: a factory second, something you have to take more time for, stay over Saturday for, etc.
I think what I'm trying to say is that if your higher-priced customers are trying to bypass your tiering to pay a lower price, then you have price discrimination. If your higher-priced customers are happy to pay more, you have product differentiation. This isn't a perfect bright line, because some customers will always want the better deal. But a good question to differentiate is whether you created your new product by tacking conditions, restrictions, and other annoyances onto a perfectly good product to keep your higher-end people from wanting it, or whether you added premium features onto an existing product to capture people with lower price sensitivity or greater desire to signal their consumption. The latter IMO is product differentiation, the former price discrimination.
There's also an important point you're missing about "enterprise" deals. Yes, enterprises do engage in a certain amount of conspicuous consumption... though it's usually at the multi-milion dollar level. (As the linked article points out, $5K is just a rounding error for an enterprise.) And yes, enterprises can overspend due to it not being the decision maker's money.
BUT... there is a good reason for that. An enterprise values stability over optimum performance, because it relies on lots and lots of mediocre people rather than a few talented ones. The public enterprise's "real" product in some sense is an attractive investment for institutional investors, and that requires actions and systems that look stupid on the surface to people who don't have their money invested in the business (as opposed to say, their time).
It helps to realize that an enterprise is not about making the most money, but making its bosses happy... and the real bosses are the investors, who want their investment to be safe as much as they want it to perform. The downside risk of a bad purchasing choice for a large organization can be immense compared to the upside benefit of the best possible choice. That's why they do what they do, and it's ultimately the investors who are paying for that extra insurance.
Is there waste? Sure. But it's a form of insurance, which is also waste if you never actually need it. The thing is, you don't know (institutionally) whether you're gong to need it, so it's a bad idea to take the risk. Especially since none of the people actually working in the organization get to partake of the upside of a good decision, but will personally be penalized for the bad decision. These factors have zip-all to do with conspicuous consumption. Plenty of employees within a company will happily pay the hobbyist price, but are bound by policies that e.g. require support or SLAs for all software purchases, etc. Or else they have requirements like auditing or whatever it is that trips the "enterprise" flag.
IME, you have to get up to a somewhat higher level of management to have conspicuous consumption as part of turf wars or signaling personal importance, and you're talking six/seven/eight figure deals there, not four or five. The closer you get to the trenches, the less people care about signaling to other managers vs. getting something to help get themselves through the day.
No, I don't think so. For one thing, pjeby thinks that price discrimination "is generally someone lowering prices" and I don't think this is true. Price discrimination involves charging different amounts to different people, depending on their reserve price, and the seller, of course, tries to make the total/average amount as high as he can, to the best of his ability. Even if you take the seller out of the equation and look only at the buyers, price discrimination amounts to a wealth transfer from the high-reserve-price people (the wealthy and the desperate) to the low-reserve-price people (the poor and the meh, whatevs).
Price discrimination involves charging different amounts to different people, depending on their reserve price, and the seller, of course, tries to make the total/average amount as high as he can, to the best of his ability.
Agreed, but pjeby's already established that he's making the comparison to a state where price discrimination is impossible, and relative to that it does seem reasonable to expect that the mean price under discrimination will be lower, often significantly so, and especially in the context of airlines.
Only under particular certain conditions. Under other conditions this is not so.
For example in businesses where variable costs dominate the cost of the product and the economies of scale have already been realized, price discrimination will not lower average prices. Ditto for supply-constrained products.
In real life the situation is complicated because most price discrimination involves slightly different products so deconstructing the demand curves is not trivial. As an example consider deluxe game editions. You get a bit of added value (a soundtrack, maybe a printed booklet or a figurine), but the price premium is typically much larger than the value of the add-ons. What's happening? Price discrimination.
Only under particular certain conditions. Under other conditions this is not so.
I edited my post before I checked to see if you had commented--remember that this is in the context of airlines, in which case it is absolutely true. We only have the modern air industry at the size and level of connections that it is because of the sophisticated price discrimination.
We only have the modern air industry at the size and level of connections that it is because of the sophisticated price discrimination.
That's not self-evident to me, but we are venturing into counterfactuals by now.
In any case, I have no objection to companies trying to engage in price discrimination -- they have full rights to attempt to do so. What I object to is the idea that I, as a consumer, cannot try to game their price discrimination schemes. The suggestion that I am morally obligated to meekly go along with whatever techniques companies devise to maximize their revenues is... strange to me :-D
That's not self-evident to me, but we are venturing into counterfactuals by now.
Only tautological propositions are truly self-evident; the rest are evident only if you look for the evidence. (Specifically, consider the profit margin of the airline industry. If we believe that price discrimination raises their revenue, a world without that would imply less revenue and thus less profit, which would put it well into the negatives, forcing cutbacks on marginal routes until we have a significantly constrained industry and customers paying much higher prices on the margin.)
The suggestion that I am morally obligated to meekly go along with whatever techniques companies devise to maximize their revenues is... strange to me :-D
It's standard reputational logic, or what people here are fond of calling "Newcomb-like" problems: only if enough people behave well enough will counterparties treat the public like they will behave. Trust is valuable, and social trust especially useful.
Only tautological propositions are truly self-evident; the rest are evident only if you look for the evidence.
...he said, before proceeding to give an a priori argument.
If anyone has any data about what the airline industry would look like without price discrimination I would be very interested to see it! Before this (fascinating) thread I had never thought about the issue. It's really counterintutive, and I would be curious to know what the magnitude of the effect is.
...he said, before proceeding to give an a priori argument.
What? If the airline industry had, say, Intel's or Apple's profit margins, then the argument that I gave would not hold. I left out what their profit margins were because I figured everyone in the conversation would either know already or look them up.
If anyone has any data about what the airline industry would look like without price discrimination I would be very interested to see it!
Check out, say, section 3 of this paper. (In general, "revenue management" is the term of art.) This article claims it adds 4-8% in revenue.
It's standard reputational logic, or what people here are fond of calling "Newcomb-like" problems: only if enough people behave well enough will counterparties treat the public like they will behave. Trust is valuable, and social trust especially useful.
I don't see the relevancy to this subthread. You are not trying to say that if only everyone trusted large, not particularly high-functioning corporations everything would be just peachy -- are you? X-/
Besides, trust them to do what exactly? I trust the airline to not deliberately overcharge my credit card and to not sell the information that I will be out of town to some burglars. I do not trust it to the extent of "Eh, just charge me whatever price you think is fair", I am not going to trust it to that extent, and I think it's a good thing, too.
P.S. I two-box :-P
Hmm...would you consider it "okay" if you somehow were able to sell the second leg of the flight to another person, to occupy the empty seat? I know you can't, just for the sake of argument. - That removes the empty seat issue, reduces this to a situation precisely equivalent to coupons, and services two people...it does take money from the airline, but so would an increase in coupon use.
this particular form of price discrimination [...] is done to compete with airlines offering direct flights between two cities, A and B. The airline offering the deal seeks to serve A<->B passengers without adding a direct flight, by using excess capacity that's available on the A<->C and C<->B routes. The airline can offer these seats below the A<->C ECA, because it expects not to fill them with other A<->C or A<->Wherever passengers anyway.
So if the the airline has free seats on the A-C flight, it seems it could do to things; either lower the price on the A-C flight until the plane fills up, or use the spare capacity to serve A-B passengers as you describe.
If they didn't have the price discrimination option (e.g. because there was a law against it, or because everyone is using hidden city ticketing), then they would be forced to take the first option. If we then change the situation so that price discrimination is allowed, then A-B passengers are better off (the get cheaper tickets) and the airline is better off (evidently)---but A-C passengers are worse off (the price of their tickets increased).
So unlike price discrimination between tourists and business travelers, which you described in your first paragraph, this type of price discrimination does not seem to be a Pareto improvement?
It is clear that if enough people use this method, prices published for a two part flight will stop being cheaper than prices published for one part of that flight. It isn't clear one way or another (at least to me) whether or not the overall consequences would be worse.
A more common example of the same thing: it is frequently the case that a round trip ticket is cheaper than a one-way ticket, and for this reason it is not uncommon for people to buy a round trip ticket and only use the first half. If people did this frequently enough, you would no longer see round trip tickets that are cheaper than one-way tickets. It is not obvious at all that things would be overall worse for people, rather than better.
there's a reason these weird fares exist
Yes, this reason is airlines trying to make more money through customer segmentation.
I'm perfectly fine with sabotaging their efforts in this regard.
Yes, this reason is airlines trying to make more money through customer segmentation.
I'm perfectly fine with sabotaging their efforts in this regard.
Are you also fine with making it more expensive for other people to fly, for your convenience?
How about file sharing to sabotage the efforts of authors, musicians, etc. to "make more money"?
I'm not saying your position is wrong -- just asking whether it's consistent.
In any case, promoting the use of self-defeating strategies is either foolish or evil. Either you're foolish because you don't realize you're going to lose use of the loophole yourself, or you're evil because you're deliberately creating a tragedy of the commons, destroying multiple sources of value for multiple parties. (When the fares or authors go away, everybody loses, not just the airlines or authors.)
If you find an anti-inductive loophole, for heaven's sake don't talk about it.
The first rule of anti-inductive loophole club is that you do not talk about anti-inductive loophole club.
Are you also fine with making it more expensive for other people to fly, for your convenience?
Yes. I do the same thing every time I price check an item and buy it from the cheapest vendor, every time I use a coupon or a promotion, every time I wait for a sale. Welcome to capitalism.
I do the same thing every time I price check an item and buy it from the cheapest vendor, every time I use a coupon or a promotion, every time I wait for a sale. Welcome to capitalism.
Wait, what?
First off, buying things from the cheapest vendor only harms other people if you're destroying the market for higher-quality goods. And it isn't harming the vendor at all!
Second, buying from the cheapest vendor doesn't involve deception.
Skiplagging or whatever you call it is buying an airline ticket under false pretenses. It's like telling a girl in a bar you're interested in a long-term relationship (full trip ticket) when in fact your goal is to get laid (go to the hub) and you don't plan to call her again after you skip out (abandon trip at the layover).
IOW, you may engage in a deception because you don't care about the other party's welfare, but it doesn't make you any less of an asshole or a contract breaker. And promoting to other people that they should deceive others for their personal short-term benefit makes you even more of an asshole.
When somebody offers to do something for a specific group of people, and you pretend to be in that group, you're obtaining their consent by fraud. Not liking the somebody in question doesn't give you a license to be an asshole, and neither does a feeling of entitlement that the girl or airline "ought" to give you the terms you want.
We can all dislike airline price segmentation all we want. But lying to the airline to get a better deal is fraudulent, and the moral justification for fraud ought to be considerably more substantive than, "welcome to capitalism!"
Firstly, I'm not at all sure that lying to a person should carry the same moral weight as lying to the (useful!) legal fiction of a corporation-as-person.
And secondly, I don't find it obvious that fraud that harms someone is the same as fraud that doesn't harm the corporation. Comparing the case where you get off at the layover point to the case where you don't, it's hard to see what harm you've caused to the airline. Obviously they would like to compare to the case where you bought the higher priced ticket. However, there are clearly four relevant scenarios (buying ticket from A->B and flying A->B, buying A->B and getting off at C, buying A->C and flying A->C, and them selling you the A->C ticket at the price you could buy the A->B ticket for). Obviously whoever gets to pick what single counterfactual scenario to compare to can decide how the comparison comes out.
Second, buying from the cheapest vendor doesn't involve deception.
Neither does this. No one is saying "I will fly these routes"; they're saying "I will buy these tickets".
No one is saying "I will fly these routes"; they're saying "I will buy these tickets".
...tickets which the airlines have offered to sell to people traveling from point A to point B, and under terms which expressly prohibit jumping off at point C. Terms that you generally have to check a box saying you're agreeing to.
In any case, the part that makes it deception is that the seller wouldn't consent to the sale if you told them what you were up to. If your general approach to interacting with people is that you'll happily deceive them in order to get better terms in your deals, then by all means proceed.
If you want to say, "well, I don't think an airline is an entity deserving of weight in my moral calculation", fine. But let's not pretend that the act itself is not a matter of obtaining consent through false pretenses, one that we would roundly condemn in another context, where our moral intuition is more inclined to see the object of the deception as a powerless victim instead of a powerful entity that can afford to be deceived.
At the very best, you could maybe say that what you're doing is Not Technically Lying.
In any event, my other point still stands: telling other people how to exploit anti-inductive loopholes is a dumb idea, even if your moral calculus doesn't cover the entities upon whom the loophole is being practiced.
PUAs, for example, became victims of their own success when they promoted canned pickup routines to the point that every bar-going female in an area began hearing the same routines regularly from different men, and every stock market strategy destroys itself if it becomes popular enough. Presumably both PUAs and traders -- even if they don't place any moral weight on the welfares of their respective "prey" -- do not benefit from having their techniques become irrelevant, and having to develop new ones.
(OTOH, I suppose people who train PUAs or traders actually do benefit from the churning of methods that results... so I guess the rule should be, "you do not talk about anti-inductive loophole club, unless you stand to profit more from its promotion and eventual replacement than you do from the loophole itself". But that's getting a bit longwinded and off-point.)
Anyway, I think that some people have drawn the inference that I have a moral objection to people cheating the airlines. I think it's more accurate to say that I think people who cheat the airlines and then talk about it in public are behaving irrationally.
IOW, I'm not so much saying OP is evil, as I'm saying OP is not evil enough. HPMOR!Quirrel's rule number two is "Don't brag", after all. ;-)
If I knew about an awesome loophole of this nature, I would absolutely not post it on lesswrong. I would not even post it on a super-secret private forum for people who figure out awesome loopholes for exploiting airlines. You cannot unshare a secret.
Not every revealed loophole is as anti-inductive as stock market strategies. Ad blockers, for example, probably won't destroy the internet unless a major browser vendor includes one and turns it on by default. But if you gain substantial value from a loophole, and you already consider your welfare more important than that of others, it's an unnecessary risk to publicize the loophole -- especially if it involves revealing to the public that you are exploiting that loophole.
It occurs to me, though, that by arguing about this, I may be making a similar meta-level error as Eliezer did when he deleted the basilisk. By arguing the point, I may have actually brought more attention to the topic, rather than less, while failing to actually educate anyone about the stupidity of the underlying ideas (either the loophole itself, or talking about loopholes).
Perhaps the more important rule is, "Do not try to silence people talking about fight club, because that just makes people more interested in fight club."
So on that note, I'm going to abandon this thread altogether.
"tickets which the airlines have offered to sell to people traveling from point A to point B, and under terms which expressly prohibit jumping off at point C. Terms that you generally have to check a box saying you're agreeing to."
Pjeby, the Austrian Airlines conditions of carriage are 21 pages long, and as far as I know that is not untypical. Yes, you have to check a box saying you have read the terms and agree with them, but I think that pretty much everyone knows that everyone checks this box without reading them, and certainly without actually agreeing to them, since they do not know the terms.
And unless you read the terms yourself when you buy a ticket, which I strongly suspect that you do not, how would you know whether or not getting off at point C was prohibited by the terms?
In fact, the Austrian Airlines terms of service contain this:
"3.3.3. If you do not use the flight coupons in the sequence shown with the intention to circumvent the fare system, we will charge you the applicable price for the actual sequence of transportation you intended to take. This will be done by determining the fare you would have had to pay on the day of reserving your actual sequence of transportation. This may be higher than the originally paid cost of the flight. The cheapest available price in your booking class will be used to recalculate the changed sequence of transportation. If the booking class originally booked by you is not available for the changed routing on the day of making the reservation, the cheapest available booking class will be used to recalculate the changed sequence of transportation. Any taxes and charges for the unused flight coupon will be deducted. Please note that we are entitled to make carriage dependent on having paid the difference in price."
Note that you are not agreeing to ACTUALLY TAKE the sequence of flights you purchase. You are agreeing to be charged for the actual sequence, so that e.g. you will have no valid complaint to a credit card company when they charge you the fare difference for getting off in London instead of going on to New York.
So if it is simply a question to keeping to your agreements, if you get off in London after purchasing a ticket from Vienna to New York via London, you are not breaking your agreement. Instead, the airline will simply be failing to carry out its threat if it fails to charge you any addition price difference for the Vienna - London ticket as opposed to the Vienna - New York. And if they do, that is more the airline failing to keep its side of the agreement, then you failing to keep yours.
This is not a secret anymore, and the attention I bring to the issue by posting it on LessWrong is pretty marginal. The fact that there's already been a lawsuit over this is an indication that the airlines think it's cheaper to try and suppress it that way than to change their pricing structure.
"...tickets which the airlines have offered to sell to people traveling from point A to point B, and under terms which expressly prohibit jumping off at point C. "
That wasn't true in Australia for Unknown, and I doubt it is true anywhere.
Think of how impractical it would be. People have plans, but plans change. People miss flights. They get sick. They're hit by a bus. They just change their minds. So they'd all be opening themselves to litigation? That's not why people get on a plane.
" Terms that you generally have to check a box saying you're agreeing to."
See Lumifer's discussion of contracts, presumably in Common Law jurisdictions: http://lesswrong.com/lw/lne/how_to_save_a_lot_of_money_on_flying/bxo2
Non negotiated contracts are just not treated the same as negotiated contracts.
"In any event, my other point still stands: telling other people how to exploit anti-inductive loopholes is a dumb idea"
In most cases, no. I'm often struck by the cheek of people telling other people how stupid they are in the pursuit of their own values.
You're just making false assumptions about the values that people have. People often share information on tactical advantages that become marginally less advantageous the more other people know about them. They're not all stupid - they're generally just obtaining some value other than the value that comes from exercising the advantage when they communicate the advantage.
"you do not talk about anti-inductive loophole club, unless you stand to profit more from its promotion and eventual replacement than you do from the loophole itself"
No. Still wrong. You best decision is not determined by the worst case macro state on the loophole. People share deals primarily because they want to help other deal seekers win too. For many, that's a value.
Again, what is the argument that shows that people are going to be worse off if airlines are prevented from setting this kind of price?
I don't see much analogy with software piracy and so on, since this would be more like sneaking onto a flight without buying a ticket. But even in the case of piracy, while it is clear that the author suffers in comparison to that very person paying, it is not clear that the author overall suffers from the existence of piracy. For example, it is quite likely that Microsoft has overall profited from piracy of Windows, since without it they would never have established their monopoly. Some open source operating system would have the monopoly instead.
I don't see much analogy with software piracy and so on, since this would be more like sneaking onto a flight without buying a ticket.
Software piracy isn't theft, so sneaking on without buying a ticket isn't actually analagous. (And in any case, you're thinking about the receiving end, not the giving end.)
When you redistribute something that's sold under terms that say, "don't copy and distribute this", you are breaking the contract you entered into with the seller. And if you intended to do it when you bought the thing, then you entered into that contract fraudulently.
This is analagous to fraudulently entering into a ticket contract to go from point A to point B, when you actually intend to go to the intervening point C.
In both cases, the seller would never have consented to the purchase at the offered price if they knew what your intentions were, which is what makes your purchase fraudulent.
This is analagous to fraudulently entering into a ticket contract to go from point A to point B, when you actually intend to go to the intervening point C.
There is no contract to go anywhere. You are buying options to take rides on planes.
are breaking the contract you entered into with the seller
That is not true. You're breaking the law which is very different from breaking the contract.
the seller would never have consented to the purchase at the offered price if they knew what your intentions were
The seller has no business knowing my intentions or trying to discriminate on their basis.
The seller has no business knowing my intentions or trying to discriminate on their basis.
Why not?
You seem to be otherwise taking a free market as a given. Everyone is trying to get the best deal. I expect companies to do it as well.
Why not?
My relationship (as a buyer) with the seller is simple and short-term: we exchange things of value and we're done. That, by itself, is a great engine of progress -- all you need to buy things is money. You do not need to be of a particular religion or a social class, you do not need to show good moral character, you do not need a license from authorities...
If the seller wants a full-blown contract where I obligate myself to, for example, not to do certain things with his products, he is welcome to offer me such a contract (these obligations, of course, would impact the price I'm ready to pay).
If I am looking for a cucumber to use as a dildo, do I really need to fully disclose that fact to all the little old ladies at the farmer's market? I am pretty sure they would not sell me cucumbers for that purpose X-D
If the seller wants a full-blown contract where I obligate myself [...]
But the seller does, and that is in fact what you are being offered, in both the cases we're talking about[1]. When you buy a ticket for air travel there's a big long list of terms&conditions that you have to say you've read and agree to before you can actually buy the ticket. When you "buy" a piece of software there's again a big long licence that (among other things) clarifies that you do not in any useful sense own the software -- you haven't bought it, you've bought a licence to use it in particular ways -- and again there are lots of conditions on it.
And yes, no doubt these obligations impact the price you're ready to pay -- just as they impact the price the seller is ready to accept.
[1] Though probably not with the cucumber.
In the intellectual property case that's basically irrelevant -- I can download a piece of software or, say, a movie without agreeing to any contract, but it still will be illegal for me to redistribute it.
With the air ticket you do agree to a contract, but here you need to dig a bit deeper.
Not all contracts are created equal. There are basically two kinds. The first kind is a contract you actually negotiate and fully understand, one where what lawyers call "the meeting of the minds" occurred. Let's call it a negotiated contract. The other kind is known as an adhesion contract and let me quote:
A standard form contract drafted by one party (usually a business with stronger bargaining power) and signed by the weaker party (usually a consumer in need of goods or services), who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract.
These two kinds of contracts are different, both legally and morally. Courts, for example, are generally hesitant to rewrite the terms of negotiated contracts, but have much less scruples about changing or just throwing out parts of adhesion contracts.
Generally speaking, adhesion contracts are not so much about setting out rights and obligations of the parties to the contract, but rather about shifting the balance of power in the possible future disputes.
Most everyone breaks adhesion contracts all the time because they are essentially designed to be broken so that the consumer always ends up the guilty party and pressure can be applied to him. It's just exercise of power, is all.
I can download a piece of software [...] without agreeing to any contract
Well, sure. And if someone wants to sell you a car but only if you sign a contract saying you'll never drive it over 40mph or something, you can always steal it instead. (I am not suggesting that illegal software copying is the same as theft in any respect other than that both are illegal.) Why is this relevant?
adhesion contract
Yes, I agree, adhesion contracts are icky and often unreasonable and widely ignored. But it is still the case that with both software and airline tickets, the seller is offering you not a straightforward sale but a contract with all kinds of terms on it, and they are setting their price on the basis of offering you the one rather than the other.
Perhaps I've lost track of what your actual argument is here. I think what it boils down to is this: "Contracts of adhesion are nasty and unfair, and I therefore consider myself free to ignore them. The restrictions on how I can use an airline ticket or a piece of software are contained in contracts of adhesion. Therefore there's no moral objection to my ignoring them." Is that right?
(For my part, I dislike contracts of adhesion as much as anyone, but am unconvinced that their unpleasantness is much justification for ignoring their terms.)
The seller has no business knowing my intentions or trying to discriminate on their basis.
I'll take this to mean then, that you will happily lie to people to get them to have sex with you as well, since you don't believe people should be allowed to condition their consent on accurate information about your intentions.
In the old days, railroads would charge more for shipping a short distance over a given track than shipping a long distance over that track... They'd have local monopoly power but not national monopoly power. Federal regulations banned this.
The hassles of flying these days have made buses more popular. For a Seattle to Portland trip I would consider it if we didn't have a train.
Just to check: there's no issue with leaving the flight at the "layover" instead of continuing to your final destination? I mean, I have no objection whatsoever to confusing somebody's database of "where cbhacking is supposed to be" but if it would lead to legal hassles or similar inconveniences I'd like to know.
See my comment. The airlines will cancel your membership/status for doing this, and if you have any additional legs on a ticket where you skip a leg, all subsequent legs will be cancelled. This will also interfere with routing of your checked baggage, which can affect you even if you don't intend to check a bag (if the overhead bins are full.)
From what I understand, if your booked flight continues on and you just "get off" earlier, you're fine. But if your booked flight has a previous leg that you do not actually take, the airline may cancel the entire ticket because the first leg wasn't used.
I doubt it - this is a trick that high-volume fliers have been using for a while. That said, airlines being annoyed by it is a reasonable concern, though I don't know what they could possibly do about - forbid you from flying with them? That seems like the sort of thing that would get attention.
Edit: see new posted warnings.
There is no substance. You have certain moral intuitions -- which I do not share -- that you wave about in indignation. I can't help you with your morality and I don't think you can help me with mine.
You're free to consider me evil :-D
I was going to wait to post this for reasons, but realized that was pretty dumb when the difference of a few weeks could literally save people hundreds, if not thousands of collective dollars.
If you fly regularly (or at all), you may already know about this method of saving money. The method is quite simple: instead of buying a round-trip ticket from the airline or reseller, you hunt down much cheaper one-way flights with layovers at your destination and/or your point of origin. Skiplagged is a service that will do this automatically for you, and has been in the news recently because the creator was sued by United Airlines and Orbitz. While Skiplagged will allow you to click-through to purchase the one-way ticket to your destination, they have broken or disabled the functionality of the redirect to the one-way ticket back (possibly in order to raise more funds for their legal defense). However, finding the return flight manually is fairly easy as the provide all the information to filter for it on other websites (time, airline, etc). I personally have benefited from this - I am flying to Texas from Southern California soon, and instead of a round-trip ticket which would cost me about $450, I spent ~$180 on two one-way tickets (with the return flight being the "layover" at my point-of-origin). These are, perhaps, larger than usual savings; I think 20-25% is more common, but even then it's a fairly significant amount of money.
Relevant warnings by gwillen:
You should be EXTREMELY CAREFUL when using this strategy. It is, at a minimum, against airline policy.
If you have any kind of airline status or membership, and you do this too often, they will cancel it. If you try to do this on a round-trip ticket, they will cancel your return. If the airlines have any means of making your life difficult available to them, they WILL use it.
Obviously you also cannot check bags when using this strategy, since they will go to the wrong place (your ostensible, rather than your actual, destination.) This also means that if you have an overhead-sized carryon, and you board late and are forced to check it, your bag will NOT make it to your intended destination; it will go to the final destination marked on your ticket. If you try to argue about this, you run the risk of getting your ticket cancelled altogether, since you're violating airline policies by using a ticket in this way.
Additionally, you should do all of your airline/hotel/etc shopping using whatever private browsing mode your web browser has. This will often let you purchase the exact same product for a cheaper price.
That is all.