In Europe, it's very rare for flight prices to go down.
There is a certain number of seats available at each price point, so they only way price can go down is if cancellations happen.
I don't know why airlines don't use a fancier pricing algorithm, but I think the protocol for flight aggregators and travel agents is very primitive, so doesn't allow it.
> There is a certain number of seats available at each price point, so they only way price can go down is if cancellations happen.
Airline price algorithms (industyy name is Yield Management) can be very complicated and counterintuitive, and differ greatly from airline from airline - your summary is way too simplistic. I have personally observed prices dropping many times - to the extent where I don't think there is all that much value in booking weeks or months in advance, especially on short, high density routes.
A huge number of factors go into pricing regimes, and they evolve over time. Getting paid earlier is always better, so prices start low, and based on historical demand. But if the algorithm notices a bump in sales to some specific city on some specific dates - maybe a concert or convention - it will experiment with raising all price buckets, lowering it again if it notices too rapid a falloff. "Common sense" means that a great deal of people try to book their flights maybe 4-6 in advance, so the algorithm will try to ensure a healthy profit during that period, but if demand is unaccountably low for some reason it will often ease off and lower them. I've seen prices drop just in the last few days when evidently they've decided all prudent people have already bought their tickets and are trying to fill the last seats with impulse purchases or bargain hunters. I once had to rebook a flight at the airport after missing it by a few minutes - and the price I paid was less than for the one I missed!
Anyway, it's nowhere near as simple as a series of buckets with price tags on them, and hasn't been for 20 years. Hotels, by the way, use comparable systems.
This is not quite accurate. The same seat can have different prices depending on a number of factors such as booking classes, availability rules, fare components, time of booking, OTA mark-downs etc http://www.ai.mit.edu/courses/6.034f/psets/ps1/airtravel.pdf gives a good overview what goes into pricing, although said being said it's from 2003 so things have evolved since then.
There is a certain number of seats available at each price point, so they only way price can go down is if cancellations happen.
I don't know why airlines don't use a fancier pricing algorithm, but I think the protocol for flight aggregators and travel agents is very primitive, so doesn't allow it.