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Case Study Econ 545 Week 2

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Case Study: Ethical Issues in Business, Week 2
Keller Graduate School of Management
ECON545, November 13, 2013

Price Discrimination
An ethical issue that individuals face today involves the price war or price discrimination involving the airline industry. According to the legal definition of price discrimination: Price discrimination is the practice of charging different persons different prices for the same goods or services. Price discrimination is made illegal under the Sherman Antitrust Act. 15 U.S.C. §2, the Clayton Act, 15 U.S.C. §13, and by the Robinson-Patman Act, 15 U.S.C. §§13-13b, 21a, when engaged in for the purpose of lessening competition, such as tying the lower prices to the purchase of other goods or services.
Price discrimination occurs when consumers are charged different prices for similar goods and the retailer cannot explain the why the differences takes place. Although the industry is one of a competitive market it benefits from the supply and demand. High demands of a particular flight allows airline companies to increase the rates and creates a scenario for a inelastic demand, individuals willing to pay a higher then expected price. This also works the same but opposite for flight that at not in high demand, the airline company now sells the seats at lower rates in hopes to secure travelers the difference is airline companies tend to withhold certain seats in hopes to sell them at a later time (prior to the actually flight date) for a higher cost.
Other factors the airline company uses to fluctuate the rates involve the actual travel time and when the flight are booked. Booking in advance tend to cost less the further out they are booked as well as the date and time the flight takes place; holidays, weekends and certain times play a factor in the fare. These specific times usually cost more then weekdays, early flight or out

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