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Manufactured Uncertainty: What the Airlines Learned From Mobile Phone Companies

Consumers view the extra fees airlines are charging as a ridiculous money grab. Airlines, however, recognize that most consumers are price sensitive to airfare and if they can make it difficult to comparison shop, consumers will be confused into paying higher overall prices.

Airlines are unbundling fares. ‘Airfares’ are lower but there are now fees for luggage, pillows, meals, coffee, and even washrooms (if the CEO of Ryan Air gets his way). What’s really happening though, is that airlines are making pricing less transparent to consumers.

The real purpose of separating costs (unbundling) is to make it harder for consumers to directly compare prices between airlines. It is now almost impossible to directly compare total prices for one airline to another without a lot of thought. Airlines are banking on consumers not doing this hard thinking and choose a flight based on something other than the lowest price.

Cell phone pricing is often bundled in a way that makes comparison shopping difficult. Most package offerings are different: With one plan you get X minutes of talk time and Y data. Another offers Z data with W minutes. Consumers are left with the difficult proposition of comparing plans to one another.

Both the airlines and mobile phone companies ensure comparison shopping difficult. In absence of easily comparable items, it is nearly impossible to predict what the total cost will be to the consumer. Choosing under these circumstances means we are making a decision under manufactured uncertainty, which leads consumers to fall back on our (often) imperfect heuristics. Of course, this is exactly want the airlines and mobile phone companies want because they have a better idea about how your brain will make decisions than you do. They use this to their advantage.

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