What flying Air Asia taught me about economics

Apr 1, 2015 00:00 · 436 words · 3 minute read

Last year in June I went to Red Dot Ruby Conf in Singapore. My company at the time was very supportive, and was funding my travel to the event, however I was still doing my best to be frugal. When researching air travel, AirAsia X was far-and-away the cheapest airline, and I happily booked a ticket. 20% cheaper than any competitors? What a steal.

The flight was scheduled for boarding at ~11pm at night, which is fine. Myself, and many other travellers, are used to boarding at such a time for exactly the reason that we bought the tickets - they were cheap. The inside of the plane was spattered with advertising for various SE Asian companies. Also fine, it makes sense to use advertising to subsidise ticket prices. The seats were quite close together, restricting seat reclining (hasn’t always been available) and leg room. The kicker, and the lesson, was when I read up on refreshments.

The in-flight purchase booklet had some interesting options, and catered for even the most budget of travellers. My favourite meal combo was a cup of ramen (hot water included) and a bottle of water. And that was the interesting part: that was a paid option. You want water? You have to pay for it. Don’t have the capability to pay for in-flight options? Too bad, guess you’re going thirsty. Or cold. Or bored as hell.

My eight hour flight sucked, and I made a point to complain to my friends and family about it (as you do). But I realised something else after that trip while once more finding myself researching prices: I would take AirAsia X again. This is the day I learned the difference between Stated preferences and Revealed preferences. In this instance, despite my bad experience travelling with AirAsia X, the price point was too good to pass up. If I was asked about the airline, only the most cleverly crafted questions would see me give praise. This would make a number of other airlines and travel products my stated preference. Despite this, I’ll be spending my money with AirAsia X, my revealed preference.

There are lots of other companies that work in the same way. Companies like […] are commonly disliked, however still have huge market share (and sometimes, huge growth).

There is some controversy within the economics community regarding using each to these types of information to inform decisions.

It follows that this concept can be seen during product validation stages. Simplistic surveys can yield actual product sales many times less than expected. Something that I’ll be keeping in mind in the future.

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