Managerial Economics · Repeated pricing duel

✈️ How to play Price Pit

You run an airline on the Dubai–Riyadh route and set fares against rivals who decide at the same moment.

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Your goal

Winning means the highest total profit over three quarters without losing passengers' trust or getting fined. High fares pay only if rivals also keep fares high, and every rival is tempted to undercut. You must read the market and decide how far to trust it.

You run one airline. You compete in a market of up to four airlines on the same route. Only the fares of airlines in your market affect your passengers.

Join in 30 seconds

Scan the QR code on the big screen with your phone camera, or open the game page and type the 4-letter code.
Type your first name. No app, no account.
Join a team or create one and name it. Your teammates get a role each. In individual mode you run your own airline.
If your phone locks or the page reloads, open it again: you return to the same seat.

Team roles

Lead: Chairs the team and submits the final decision. If the Lead's phone dies, any teammate can take over. In this game: Make the final call on the fare and own the pledge in Quarter 2.
Analyst: Owns the numbers and the team's prediction for the round. In this game: Estimate what rivals will charge and what that does to your passengers.
Treasurer: Watches the budget and costs before the team commits. In this game: Watch fixed costs: unsold seats burn money.
Risk and ethics officer: Flags harms and pushes back before the team commits. In this game: Flag anything that looks like coordinating prices; regulators read public statements too.
Voice: Talks to other teams and presents the team's story at the debrief. In this game: Write the public statement and read the rivals' signals.

The three rounds

Each round you predict your own result, make your decisions within about 7 minutes, and then the model reveals what happened. An event card lands between rounds.

1
Quarter 1 · Open skies
You set fare, capacity and marketing with no information about rivals. Everyone decides at the same moment.
Watch for: Compare your fare with rivals' average and check your seat fill. The projector shows the average fare this quarter.
2
Quarter 2 · Talk is cheap
Two new fields: a public pledge and a public statement. You also see last quarter's fares in your market. After the reveal, pledges and statements appear on the projector.
Watch for: Did fares in your market drift up? Read the pledges table and note who pledged what.
3
Quarter 3 · Last call
Pledges made in your market show on your phone. Markets where two or more airlines pledged Hold and fares stay well above the competitive level may be fined. An open inquiry makes a fine certain.
Watch for: The projector shows the Nash (competitive) fare against the room average and how many airlines were fined.

Your decisions

What each control on your phone does, and how to think about it.

Fare per passenger	Every round	AED 300 to 1,500. Your demand falls as your fare rises and grows as your rivals' average fare rises. Profit per passenger is fare minus cost per passenger. Ask two questions: what will rivals charge, and what do I gain by sitting a little below them?
Seat capacity this quarter	Every round	Lean: 36k seats, AED 2m fixed. Standard: 46k seats, AED 4m. Expand: 60k seats, AED 7m. You can carry no more passengers than seats. Low fares fill seats quickly; high fares need fewer seats. Match capacity to the fare you plan.
Marketing spend	Every round	AED 0 to 5m, paid from profit. It adds 3k passengers times the square root of your spend, so AED 1m adds about 3k and AED 4m about 6k. Each extra million adds fewer passengers. Check that the extra passengers earn more than the spend.
Public pledge	Round 2 only	Hold fares, No comment or Compete hard. Pledges are not binding and do not change demand. Rivals in your market see them in Quarter 3. If two or more pledged Hold and the market keeps fares well above the competitive level, Hold pledgers risk a fine. Think about what each pledge signals, and whether rivals have a reason to keep their word.
Public statement to the market	Round 2 only	Up to 100 characters, shown on the projector and to your market in Quarter 3. It does not change demand or fines in the model. Keep it professional. In real markets, talk about prices is exactly what regulators read.

What you see on your phone

Your route this quarter: Shows your cost per passenger (AED 250 at the start) and seats for each capacity option. It also lists rivals in your market and any budget carrier fare.
Last quarter in your market: From Quarter 2: each airline's fare, passengers and profit in your market. Use it to guess what rivals will charge next.
Pledges made in Quarter 2: Quarter 3 only: each airline in your market, its public pledge and its statement. Decide whether you believe them.
Regulator watching: Appears after the inquiry event. It warns that high, matching fares backed by pledges risk a fine and a loss of trust.

How you are scored

Every game in the library uses the same scoreboard. Your round result is your Profit (AED m); the leaderboard adds resilience and trust.

Score = 100 × (0.5 × performance + 0.25 × resilience + 0.25 × trust) + prediction points

Performance: ProfitProfit in AED m each quarter: (fare minus cost per passenger) times passengers carried, minus the capacity's fixed cost, minus marketing, minus any fine. Passengers carried are the lower of demand and seats.

Resilience (0–100)Resilience moves halfway each quarter towards a new score. Filling your seats raises it most, and a healthy profit margin on revenue raises it further. Empty seats and losses pull it down.

Trust (0–100)Trust rises when your fare sits below the competitive level and falls when it sits above, a little each quarter. It gains 1 if your seats cover demand and loses 4 if you turn away many passengers. A fine costs 20 points.

Performance is your total Profit over the rounds, scaled from the lowest to the highest in the room. Before each round you also predict “Your profit this quarter”: land close and earn up to 10 bonus points; miss by the whole amount and earn none. The facilitator may change the weights before the game starts.

Tips

Your best fare depends on rivals' fares. Before choosing, estimate the average your market will set.
If everyone holds fares high, all earn more. Each airline gains even more by undercutting. That is the dilemma.
Turning passengers away means capacity, not price, limited you. Either raise the fare or add seats.
A pledge is cheap talk. Ask what would make it credible, and what a rival gains by breaking it.
Events shift the competitive fare. Higher fuel costs push it up; a comparison app pushes it down.

Common mistakes

Setting a very high fare alone. If rivals stay lower, your passengers move to them and your seats sit empty.
Buying Expand capacity with a high fare. You pay AED 7m for seats you cannot fill.
Pledging Hold without thinking about Quarter 3. If the market looks coordinated, every Hold pledger in it risks a fine.

A worked example

Your airline sets AED 900 with standard capacity and AED 1m marketing. Rivals in your market average AED 953, so demand is about 48.6k passengers. You carry 46k, filling every seat and turning about 2.6k away. Revenue is AED 41.4m and costs are AED 16.5m, so profit is about AED 24.9m.

Shocks that can hit

The facilitator draws one event card before rounds 2 and 3. It changes the market from that round on.

Jet fuel jumps 25%. A supply shock pushes jet fuel prices up. Your cost per passenger rises from now on.
A low-cost carrier enters. Budget airline SkyThrift starts flying the route at AED 550. Some passengers will compare against it, and the market shrinks for everyone else.
Competition authority opens an inquiry. The regulator says it is reviewing fares on the route and public statements by airlines. High, matching fares now carry real risk.
Events season boosts travel. A major exhibition and a sporting event bring a surge of travellers. Demand on the route rises 15%.
Fare-comparison app goes viral. Passengers now compare fares instantly. Demand becomes more sensitive to price.
Airport slot cuts. Runway works cut available slots. Every airline loses 10% of its seats.

The model behind the game

Linear demand oligopoly (differentiated Bertrand). Your passengers fall as your fare rises and grow as rivals' fares rise. If everyone keeps fares high, all earn more, but each airline gains even more by undercutting. That tension is the prisoner's dilemma.

q_i = a − b·p_i + c·p̄_rivals (capped by seats) ; profit = (p_i − mc)·q_i − capacity − marketing ; Nash fare p* = (a + b·mc)/(2b − c)

Oligopoly: A market with a few sellers whose decisions directly affect each other.
Nash equilibrium: A set of choices where no firm can do better by changing only its own decision.
Prisoner's dilemma: A situation where all would gain by cooperating, but each gains more by defecting.
Tacit collusion: Firms keeping prices high together without a formal agreement, often through signals.
Competition law: Rules that ban firms from fixing prices together. Public pledges can be evidence.
Load factor: The share of your seats that are filled. It drives Resilience in this game.
Capacity commitment: Choosing seats in advance; it limits how many passengers you can win.

For facilitators 3 rounds · about 50 minutes

Set-up

Team mode with three to eight teams works well. Airlines are grouped into markets of up to four by join order.
Bots fill the room to three airlines, so even a small class has a real market.
Allow 7 minutes per round. Quarter 2 may need extra time for writing statements.
At the starting parameters the competitive fare is about AED 940. Keep this to yourself until Quarter 3.
Before Quarter 1, say clearly that fares are set at the same moment and nobody sees rivals' choices first.

Modes

Team: One airline per team; markets of up to four teams. The Voice writes the Quarter 2 statement and the Lead owns the pledge.
Individual: Each player runs an airline in a market of up to four players by join order. Bots fill only up to three airlines in total.
Hybrid: Each player runs an airline, and the team board averages members' scores. Teammates may land in different markets, so they cannot always coordinate.

Run sheet

Before class	Open the facilitator console on the projector laptop, choose the mode in Setup, and check the QR shows.
0–5 min	Students scan and join. Read the situation aloud while teams form. Point out the roles on their phones.
5–14 min	Round 1: 7 minutes to decide and predict, then Reveal. Read the headline and one surprising line from a team.
Between rounds	Draw or choose the event card. Give teams 30 seconds to read it before opening the next round.
14–23 min	Round 2, then Reveal.
25–34 min	Round 3, then Final results: podium, awards and the score chart.
Last 12 min	Debrief with the questions below, then open reflections (4 minutes). Download the CSV.

What usually happens

Teams in Quarter 2 try to coordinate through statements. Note them for the debrief on legal signalling.
Someone usually undercuts in Quarter 3 after pledging Hold. Ask why that was rational.
Low fares with lean capacity turn passengers away. Use it to show capacity as a commitment.
If the inquiry event is drawn before Quarter 3, Hold pledgers in high-fare markets are fined for certain. Discuss risk.

Debrief questions

Did fares in your market drift up after the pledges in Quarter 2? Who broke ranks first, and why was that rational?
Compare the average fare with the Nash fare on the screen. What kept the room near it, or away from it?
When is talking about prices legitimate signalling, and when does it become collusion a regulator could punish?

Follow-up probes

What did you assume rivals would charge in Quarter 1, and how close were you?
Did any pledge change your fare? Why or why not?
What would make a high-fare agreement stable in a real airline market?
How did your capacity choice limit or help your pricing?
Which event moved your fare most, and in which direction should it have moved?

Reflection and evidence

Explain your Quarter 3 fare using the idea of Nash equilibrium and the prisoner's dilemma. What would have to be true for high fares to last?

Students write 80–120 words on their phones. The Data tab exports every decision, result, prediction and reflection as one CSV for grading.

Console controls

Pause, extend or set the timer; step back a round
Draw, choose or write the event card
Move players, make a Lead, add computer players
Award or fine with a reason that appears on phones
Message every screen; hide names; spotlight a team
Keys: P projector mode, Q join QR