Question: Frequent flyer coupons are given by airlines to customers based on the number of miles these customers fly with that particular airline. These coupons can be redeemed for upgrades on flights and free tickets. The number of free flights is based on the number of miles flown. Many fliers sold their coupons to other people. In 1987-88 the airlines began to restrict frequent fliers from selling their coupons or tickets to others, sometimes even voiding the tickets of people other than those who were issued the coupons.

A. Do frequent flier programs represent price discrimination? Why or why not?

B. Why do you think airlines stopped letting others fly on tickets issued through the frequent flier program? Surely the airline did not care what the name of the customer sitting in a particular seat was.

To maximize its profits airlines oversell the number of seats available. They assume through historical data that there will be a small percentage of ‘no-shows’. That is people who buy tickets but do not show up. If airlines start allowing customers to simply give their ticket