When checking the return segment of flights on NWA from Minneapolis to Flint, Michigan on January 2, I found the following round trip fares:
Leaving Mpls for Flint on January 2 at:
6 a.m. $411
9 a.m. $543
10 a.m. $618
1:10 p.m. $931
1:11 p.m. $881
I guess I can somewhat understand the early morning-late morning-afternoon price differentials. Being the holiday season right after New Years Day, with a lot of non-business tourist/leisure travellers, who wants a 6 a.m. flight? Low demand, low price vs. a more leisurely time of say, 10 a.m. And you want to sleep in, relax, and get to the airport for an early afternoon departure at 1 p.m.? Well, it's going to cost you about $500 for that extra time!
What I don't understand is the $50 difference in flights that leave Mpls for Detroit only one minute apart! I think I'd book the 1:11 flight and save $50 for that extra minute, that's $3,000 an hour!
Bottom Line: Airlines are the masters of price discrimination, and they are trying to: a) charge whatever the market will bear for each seat, and b) fill the planes to capacity with passengers as often as possible (hence the overbooking strategy). As flights approach capacity, they raise the ticket prices for the remaining seats. If there are a lot of empty seats available, lower the prices until the plane is full, or at least don't raise prices.
Also, because the marginal cost of each additional passenger is zero, or close to zero, the airlines face a "pure selling problem" and just try to maximize revenue on each flight.
Puzzle remains: If airlines price discriminate, why don't movie theaters?