alt Hacker NewsIn your example ($50/$100), the airline is extracting all consumer surplus. This is called perfect price discrimination, and it is bad for consumers.
There is nothing stopping the airline offering Bob $50 per seat in the second scenario, other than profit preservation. If they were making a profit on the $50 ticket in the first scenario, they are making it in the second. They just happen to also be making less profit on the $100 ticket.
In effect you are making corporate profit a constraint on the market, which is not the case.
Your example actually shows that the welfare extractive pricing algos companies use today can be undermined by AI, which is good for consumers in this narrow example.
Well actually, price discrimination permits a kind of cross subsidy when there are large fixed costs involved, and flights have substantial fixed costs.
It might not be profitable to fly a route at all if not for high paying customers. But if you can get a few high paying customers and provide return on capital, then extra customers are, relatively speaking, gravy.
And the cheap flights for those customers? Consumer surplus, baby.