Two people sit side by side on a flight from Delhi to Mumbai. Same seat size, same sandwich, same landing time.
One booked six weeks ago and paid ₹4,200. The other booked last night and paid ₹11,800.
Nobody cheated. The airline just found a way to charge each of them closer to what they were willing to pay.
What’s going on
This is price discrimination: selling the same thing, or nearly the same thing, at different prices to different customers.
The problem it solves is simple. Any single price is wrong for most people. Set it high and you lose everyone who’d have paid a little less. Set it low and you leave money on the table from everyone who’d have happily paid more.
So sellers build ways to split customers apart, and let each group pay its own price.
The roofless carriages
In 1849, a French engineer named Jules Dupuit noticed something odd about railways. Third-class carriages often had no roofs, even though a roof cost very little.
His explanation was sharp. The company wasn’t trying to punish poor passengers. It was trying to frighten the rich. If third class were comfortable, people who could afford second class would ride third instead. The discomfort was there to keep them paying more.
Think of fences
Each price tier is a fence. Customers sort themselves by which fences they’re willing to climb:
- Time. Book early or pay more. Matinee shows cost less than evening ones.
- Who you are. Student plans, senior citizen fares, lower app prices in India than in the US.
- Effort. Clip the coupon, wait for the sale, enter the promo code. People who bother pay less.
- Version. Economy and premium economy, paperback and hardback, the base model and the “Plus”.
The best fences are ones that the price-sensitive will climb and the rest won’t bother with. A business traveller won’t book six weeks out. A student will happily show an ID card.
Where you’ll spot it
Railway Tatkal tickets. Cheaper weekday cinema seats. Software with a free plan, a “Pro” plan and an “Enterprise: contact us” plan. Once you look, single prices start to seem rare.
How to use it, carefully
If you’re pricing something, ask what each group of customers values most, and build a version or a fence around it.
But keep it visible. Customers accept prices they can see the logic of: book early, show your ID, pick a version. Prices that change quietly based on who’s asking feel like a trick, and trust costs more to rebuild than any margin you’d gain.
One product, many prices. The trick is letting each customer pick their own.
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