Students participate in a mock airfare war and learn how to set prices in a competitive environment while signaling other companies
Fare Game is a simulation of the airfare competition where students participate in a mock “fare war” to demonstrate how airlines compete and/or cooperate using fare cuts and hikes. As active participants in price-setting and resource allocation, students learn how to keep their company profitable, to keep investors content, and to “signal” other competitors in the marketplace.
How do you teach students about price-setting and strategy in a competitive environment? What are the best methods of demonstrating how companies subtly communicate with each other using different “signals”?
Fare Game offers a novel approach to teaching game theory, price-setting, and communication through “signaling”. Students assume the identity of different airlines in a competitive market and learn first-hand how to work with their fixed costs, price points and resources to maximize profits and stay competitive with consumers.
The Fare Game interface allows students to enter their proposed fares into the system as well as track the actions of the opposing teams. The interface includes:
- Price Entry — teams enter their fares for the next day’s flights. Fares are posted to the entire class and profits and losses are calculated and returned.
- Current Information — after setting prices, teams will see how they stacked up against their competitors for the different routes in the market. Profits and losses are calculated and displayed, based on fixed costs for each airline and on pricing.
- Messages — each team can issue a “press release” in their efforts to signal other companies in their competitive space.