Wednesday, August 21, 2013

Signaling that you're not a business traveller by committing to a mixed strategy

Airlines like to price-discriminate against business travellers and others whose trips are non-discretionary. So, how to identify the leisure travellers?

Travel site offers substantial airfare discounts to those who agree to "Pick Two, Get One" and choose two destinations and let the site choose one of them.

1 comment:

Troels Bjerre Sørensen said...

I have seen this mentioned several times. It is not accurate to call it a mixed strategy. The traveler declares his indifference between two alternatives, and the mechanism is free to optimize its allocation. If the commitment was truly to a mixed strategy, the traveler would specify a distribution over the alternatives, and the mechanism would sample from the given distribution.