Well with the greatest minds in Austrian economics assembled here at FEE, we are pondering an interesting economics puzzle, put to me by a former SLU colleague (from our math department):
Why do most airlines charge substantially more for a one-way ticket than a round-trip ticket on the same route?
For example, my colleague can buy a round-trip for about $250 whereas a one-way will cost him almost $700 on the same route. What gives?Professors White and Lewin have offered two possible answers: 1. It’s price discrimination – one-way fliers might need specific times and flights in a way that makes their demand more inelastic. 2. Some people might pay a premium for a one-way ticket in order to leave their return open-ended. My own thought was that it’s a matter of not wanting an empty seat coming back the other way given the low probability of a “double coincidence of one-way tickets.” None of us are very confident at all in our answers. Thoughts from our wonderful commentariat?