In 1992, American Airlines (AA), the market share leader in the
airline industry, announced a new pricing strategy—Value Pricing.
AA narrowed the number of possible fares from 500,000 to 70,000 by
classifying each into one of four classes (first class, coach,
7-day advance purchase, and 21-day advance purchase). It also began
pricing based on flight length. According to AA, the purpose of
Value Pricing was to create “simplicity, equity, and value” in its
prices. AA believed that Value Pricing would...