A quick post to share a couple of odd examples of price discounts based on quantity that I recently found:
The advertisement clearly indicates that preferential prices are given from the 3rd mug. Let’s see: the first and second sell for 7€ each. The 3rd one comes for an extra 4€. So far, so good. Then the 4th mug is sold for another 7€… (!?) where is the preferential pricing? The fifth and subsequent mugs come for extra 5€ each. See it graphically below:
Think of a group of friends wanting to pool their purchase to lower the cost. If three friends had already decided to buy a mug, they would pay 18€, or 6€. If then came a fourth friend saying that she also wanted to join the group to buy a mug cheaper than the single one for 7€, the other 3 would have an incentive to reject her, as they would then have to pay 6.25€…
Let’s see this other example.
It comes from the colleagues at the Aeroclub du Sarladais. Here there are prices for short flight excursions. They offer 3 different flight durations with different prices for 1, 2 or 3 passengers. If more than 1 passenger flies, there is a discount. As there are several options, I prefer to use a table rather than a graphic to show what caught my attention:
In this case, in two of the cases, the marginal price to be paid by the 3rd passenger is more expensive than that to be paid by the 2nd passenger (I highlighted them in red). However, the oddity is not so striking as the average price to be paid by 3 passengers is always cheaper than the one to be paid by 2 passengers, thus, there is no economical incentive for 2 friends rejecting a 3rd wanting to join them in the experience of flying (good!).
I also found a more subtle issue with the pricing per minute for the 30 minute flights. Let’s see it with the flights for 1 passenger:
- 15′ sell for 45€, that is 3€ per minute.
- 20′ sell for 55€, that is 2.75€ per minute.
- 30′ sell for 80€, that is 2.67€ per minute.
So far, so good, however, if you look at the marginal prices of the added flight time:
- 20′-15′ = 5′, for 55€- 45€ = 10€, that is 2€ per minute.
- 30′-20′ = 10′, for 80€- 55€ = 25€, that is 2.5€ per minute. Why are these minutes more expensive? 🙂
One response to “Odd examples of price discounts”
I am only familiar with the payload-range of commercial aircraft, and in this case, once you pass a certain level of distance or payload, you need to carry more fuel to carry the fuel required to accomplish the mission required. If adding the last passenger, or adding extra flying time made the aircraft burn more block-fuel per passenger, it would in that case make sense to charge more for this. In that case it should imply that the aircraft is at the limit of its payload-range. This would however make more sense for longer flights and at the same time the cost per passenger mile should be a bit more linearly related between both factors (in a triangular fashion).
Anyhow, this assumes that the direct operating costs per trip increase non-linearly per passenger-mile at the required stage-lenght. I have no clue if that is the sense for the stated aircraft at all. Then again, this could just been something put up in place as a measure to attain extra extra revenue in those periods when they is more demand and the supply is fixed (third passenger during summer) and at the same time incentivise further attachment during low demand periods (second passenger during winters).
For the case of the mugs… that is just a maths miscalculation.