Question

To the dismay of business travelers, airlines now discretely cater to families with young children who fly in first class (Katherine Rosman, “Frequent Criers,” Wall Street Journal, May 20, 2005, W1). Suppose the family’s value is $4,500 from traveling in first class and $ 1,500 from traveling in coach. The total price of first- class tickets for the family is $4,000. Thus, the family’s net value of traveling in first class is $500 = $4,500 – $4,000. Because the total price of coach tickets for the family is $ 1,200, the family’s net value of traveling in coach is $300 = $1,500 – $1,200. A seasoned and weary business traveler who prefers to travel first class observes that the family is about to purchase first-class tickets. The business traveler quickly considers whether to offer to pay the family to fly in coach instead.
a. Suppose that the business traveler knows the value that the family places on coach and first- class travel. What is the minimum price the traveler can offer the family not to travel in first class?
b. Suppose the business traveler values peace and quiet at $ 600. Can the business traveler and the family reach a mutually agreeable price for the family to move to coach?
c. If instead the business traveler values peace and quiet at $ 200 can the business traveler and the family reach a mutually agreeable price for the family to move to coach?



$1.99
Sales4
Views171
Comments0
  • CreatedNovember 13, 2014
  • Files Included
Post your question
5000