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A regional airline is the only airline that offers a direct flight between two small cities. There are two types (A and B) of travelers
A regional airline is the only airline that offers a direct flight between two small cities. There are two types (A and B) of travelers between these two cities; their utilities from purchasing a ticket days before travel at price are = 450 6 and = 900 24 , respectively. There are 200 travelers in total, and 30% of the travelers are type-B travelers. Assume that the airline cannot charge different types of travelers different prices at a given time and that the airline has enough capacity to serve all customers. Assume that all fixed costs are sunk (zero). How can the airline use dynamic pricing to segment the market based on travelers' heterogeneity in time sensitivity to achieve the highest profit?You need to specify a price path (i.e., give an example of what prices are at different that will maximize the airline's profit)
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