1. Suppose a business traveler is willing to pay $ 1000 to fly from New York City...
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Question:
1. Suppose a business traveler is willing to pay $1000 to fly from New York City to Miami on an unrestricted ticket. The business traveler, however, is willing to pay $350 for a ticket with a two-week minimum stay. A vacation traveler is willing to pay $200 for a ticket with a two-week minimum stay and $400 for an unrestricted ticket. The marginal cost of both tickets is $100. What is the profit-maximizing pricing policy for the airline? 2. What is total surplus for selling one ticket to a business traveler and one ticket to a vacation traveler in part (A) ?
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