A hidden piece of game theory.

At the 2017 Airline information conference, I was a little surprised to hear a talk on philosophy. But in fact it was quite thought provoking.

Game theory has existed for many years and most probably impacting our lives in a way which we never realised https://en.wikipedia.org/wiki/Game_theory

What was presented was a top level summary. In our day to day lives, we are consious of the decisions around value Р we dont necessarily want the cheapest, and often accept we cannot afford the most expensive. However we will often accept somewhere in between. Its the gap between this upper and lower price which can drive revenue.

It was described that a lobster dish may exist on the menu for $100 only to support the purchase of a $80 lobster dish. the mere fact that the $100 dish was present allowed a potential $50 dish to be marketed at $80. Its value was proportionate to the selection.

They went on to suggest that by pricing a few seats for a high value this would encourage the sale of higher value seats. Such as pricing the 1st row as $100.

The difference in some respect, is that I would hope that the $80 lobster dish isn’t the same as the $100 one. For an airline the seat is the seat, its just nearer the door, and may or may not have more leg room.

This is an interesting concept, and one which I look forward to observing in more detial as to whether consumers really perceive greater value or simply think its a deception. But either way its used in retail today, and has now made me aware that I may be being manipulated more than I realise!

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