How behavioral economics can help you save on airfare

abcnews.go.com:

When booking flights, navigating extra fees and upgrades can be overwhelming, which is no accident

It’s not just you: Shopping for airfare is harder than ever. Choosing between basic economy and regular economy fares and navigating add-on fees makes booking more complicated, and that’s no accident. Airlines are harnessing lessons from a still-emerging academic field known as behavioral economics to nudge customers into spending more.

“Behavioral economics was developed by incorporating ideas from psychology into standard economic theories,” says Cait Lamberton, a professor of marketing at the University of Pennsylvania’s Wharton School. “If you see a deal that is available for only a short amount of time, and you pay more than you usually would, standard economics would say you’ve made an irrational decision. Behavioral economics says that no, what your brain is doing is responding to scarcity.”

These seemingly irrational choices are called “biases," many of which can affect how we shop. For example, “loss aversion” makes us hyper-sensitive to losing money and more likely to buy something like trip protection. The “decoy effect” makes us more likely to choose between two suboptimal options when a third, even worse option is presented. For example, airlines may offer a decoy like an expensive premium ticket with fewer amenities, which may make the cheaper premium ticket with more benefits look more appealing.

Airlines are well aware of these tendencies and how they drive our decisions. So to save money on flights, customers need to understand how the airfare shopping experience has been engineered to exploit our biases.

DON’T BUY BECAUSE EVERYONE ELSE IS

Airlines will use a technique called “social proof” to upsell