An example of a simultaneous move game in the airline industry is the competition between airlines to set ticket prices for a given route, let’s say, New York to Melbourne, Australia. When airlines compete on a specific route, they must decide how much to charge for their tickets to maximize their revenue while remaining competitive with other airlines. Each airline must make this decision simultaneously without knowledge of its competitors’ pricing strategies (Froeb et al., 2022). This creates a situation where each airline must anticipate the pricing strategies of its competitors and make decisions based on the potential outcomes of the game. If one airline sets its ticket price too high, it risks losing customers to a competitor offering a lower price. However, if all airlines set their ticket prices too low, they risk leaving money on the table and not maximizing their profits. Therefore, each airline must carefully consider the market demand, costs, and competition to make the optimal pricing decision in this simultaneous move game.
Using an example to discuss the definition and rationale of Price Discrimination.
Price discrimination is a pricing strategy used by business entities or organizations that charge different prices to different groups of customers for the same service or product. The rationale behind price discrimination is to capture the maximum amount of the consumer surplus possible while at the same time generating more profits (Froeb et al., 2022). By charging different prices to different customers, the business entities intend to extract more value
