Question
Qatar Airways is the only airline operating weekly nonstop service from Doha to Dhaka. After extensive market research, Qatar Airlines has determined that, each week,
Qatar Airways is the only airline operating weekly nonstop service from Doha to Dhaka. After extensive market research, Qatar Airlines has determined that, each week, there are 100 business executives and 400 service workers who need to travel round trip between the two cities. The business executives have generous travel budgets, and are accustomed to the exemplary level of service provided by Qatar Airways in Business Class. They are willing to pay QAR 20,000 for a roundtrip Business Class ticket and QAR 2,000 for a roundtrip Economy ticket. The service workers have limited budgets, and are only willing to pay QAR 1,000 for a roundtrip flight, regardless of service level. The cost to Qatar Airways of serving a Business Class passenger is QAR 2,000, whereas the cost to serving an Economy Class passenger is QAR 500.
What is the incentive constraint facing Qatar Airways to ensure that Business Executives purchase a Business Class fare
What is Qatar Airways' optimal pricing strategy in this situation? What are the resulting weekly profits
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