An amusing discovery today when buying a ticket to Chicago for tomorrow's "Brands, Competition and the Law" conference at the Loyola-Chicago Institute for Consumer Antitrust Studies:
United and US Airways offer the same flights at the same price, operated on United Express equipment. I could just pick which airline I preferred but it made not a whit of difference with regard to when or how I will fly (same times, same planes, same check-in counters). I went with US Airways just in case there is a bonus of some sort paid to the booking airline; my idea was to protect the one carrier still flying non-stop from Indianapolis to National.
You could buy the same itinerary on the same airplanes with United as the named airline going one way and US Airways as the named airline going the other. Once again, it matters not to the traveler, who still checks in at the United counter on both ends. But it costs $7 more for the trip if you have the dual-branded ticket. The $7 price difference held across at least two itineraries (I didn't look further).
I wonder why?
1. It's hard to think of a clearer example of perfect competition than two airlines both selling exactly the same flights on the same website; it would be difficult for either airline to realize a price premium on the basis of a brand unless the buyers were not utility maximizing. But that should hold for the dual-branded flights as well. That suggests that brand differences may be relevant for an uninformed or non-utility-maximizing group of infra-marginal consumers.
2. That should hold also for the dual-branded flights, though. The only difference I can see with dual branding is the greater likelihood of consumer confusion -- thus the possibility of a behavioral exploitation strategy at play.
3. It could be a screw up -- the sub-optimal conduct is on the part of the sellers, or their computer systems.
4. I wonder if it is a contract term? Perhaps there is a non-discriminatory rate term in the code-share agreements that is drafted badly enough to create a loophole for a dual-branded flight. (Even if so, that still means somebody is trying to benefit from a behavioral exploitation strategy, or is him/herself messing up the pricing.)