Chapter 54 Question ○47

Why are air tickets more expensive now, but tickets to Broadway shows are cheaper? (Glass Ince Edis Nitos) Theater fans can buy tickets for many Broadway performances at half price at the ticket window in Times Square in New York in the afternoon.But if someone books a plane ticket for the day, they can only pay a high price, and the price may be twice as high as usual.How to explain this difference? There are still empty seats when the plane takes off or the curtain goes up, which means a permanent loss in income.Both airlines and theaters have strong incentives to fill as many seats as possible.At the same time, filling a seat at a discount often means losing the opportunity cost of someone else paying full price for the same seat.Therefore, the marketing problem that airlines and theaters have to overcome is to fill seats as much as possible without sacrificing too much average revenue per seat.

In the airline industry, marketing executives have long discovered that business travelers are more likely to change their travel arrangements in the moments before departure and are less sensitive to fares than holidaymakers.Hence the airline's strategy of charging full price for last-minute tickets (mostly on business trips) and giving discounts to those who book in advance (mostly holidaymakers). The theater industry faces a slightly different balance of forces.As in the airline industry, high-income earners are far more insensitive to ticket prices than low-income earners, but high-income earners who watch dramas are generally less willing to buy tickets at the last minute.Buying half-price tickets at the ticket gates at the last minute, audiences have to face two barriers.One is that it takes an hour or two to line up.High earners are mostly reluctant to do this just to save a few bucks.Second, and more importantly, only a handful of shows (generally not particularly popular shows) have discounted tickets.High-income earners have a high opportunity cost of time, and it is hard for them to spare a night of precious time to watch dramas. Of course, they only want to watch the dramas they want to watch the most.For low-income audiences who are more price-sensitive, these two thresholds are easier to cross.They might not go to a Broadway show at all if they couldn't line up at the ticket window for half-price tickets.

Although the thresholds are quite different in the two cases above, both have the effect of filling more seats (thus reducing the average cost per passenger served).Without these thresholds, the average cost of services would be higher. Forcing buyers to jump over a hurdle to qualify for a discounted price necessarily requires an effort by the buyer to be able to jump over that hurdle.In some cases, however, the discount threshold simply requires knowledge.Once you have this information, you can enjoy lower prices with no extra effort.