The willingness to pay of a business traveler and a tourist for a return flight on...
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The willingness to pay of a business traveler and a tourist for a return flight on a Friday, Saturday, or Sunday are shown in the table. Assume there are one of each type traveler (1 business and 1 tourist traveler). The airplane for these flights is smaller and the airline hasn't been able to reconfigure it to have separate sections for the two types of fliers. As such, the airline can set separate prices for the three days and let the travelers select which day to travel. For example, if the airline sets a price of $1200 for each of the three days, the business traveler will fly on Friday and the airline will earn $1200 in revenue (the tourist won't travel because the price is too high). If the airline sets a price of $600 each day, the business traveler will fly on Friday and the tourist will travel on Sunday and the airline again earns $1200 in revenue (travelers fly on the day they earn the most consumer surplus, the business traveler will fly on Friday and earn $600 consumer surplus ($1200 - $600) and the tourist will earn $250 consumer surplus ($600 - $350)). Friday Saturday Sunday Business $1200 $1000 Tourist $600 $600 $850 $350 What is the most revenue the airline can earn in this example? The willingness to pay of a business traveler and a tourist for a return flight on a Friday, Saturday, or Sunday are shown in the table. Assume there are one of each type traveler (1 business and 1 tourist traveler). The airplane for these flights is smaller and the airline hasn't been able to reconfigure it to have separate sections for the two types of fliers. As such, the airline can set separate prices for the three days and let the travelers select which day to travel. For example, if the airline sets a price of $1200 for each of the three days, the business traveler will fly on Friday and the airline will earn $1200 in revenue (the tourist won't travel because the price is too high). If the airline sets a price of $600 each day, the business traveler will fly on Friday and the tourist will travel on Sunday and the airline again earns $1200 in revenue (travelers fly on the day they earn the most consumer surplus, the business traveler will fly on Friday and earn $600 consumer surplus ($1200 - $600) and the tourist will earn $250 consumer surplus ($600 - $350)). Friday Saturday Sunday Business $1200 $1000 Tourist $600 $600 $850 $350 What is the most revenue the airline can earn in this example?
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