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Q Why does it make sense for an airline to offer discounted fares to students, senior citizens, or some other group, when those fares are lower than the average cost per passenger? Would it make sense to offer deeply discounted fares, such as a $59 ticket from Los Angeles to San Francisco, 1 hour before departure? Why?

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Before starting with the discussion, let us have a quick knowledge about Price Discrimination. Price Discrimination is basically a selling strategy that charges different prices of the same good from different customers for any reason, be it age, personal, corporate etc. To be precise the produces in such circumstances actually charges the customer the highest price for the particular good. It is generally of three types: First degree, second degree and third degree.