Business, 07.03.2020 00:05 caro74

Consider an airline trying to sell plane tickets to business travellers and tourists. Theairline cannot distinguish between the two at the point of sale, but knows that ingeneral, business travelers have higher willingness to pay for better seats. Let PF and PC be the price of first class and coach tickets respectively. Suppose that businesstravelers are willing to pay $1000 for a first class seat and $400 for a coach seat, where as tourists are willing to pay $500 for a first class seat and $300 for a coach seat.

What are the information rents that the airline must leave to business travelers? What is the price of a first class seat?

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Consider an airline trying to sell plane tickets to business travellers and tourists. Theairline can...

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