Airlines practice price discrimination by charging business travelers and leisure travelers a differ Show more Airlines practice price discrimination by charging business travelers and leisure travelers a different price. Different customers pay varying prices for essentially the same coach seat because some passengers qualify for discounts and others do not. These discounts can be substantial in many cases so that some customers who qualify for discounts will be paying a significantly lower airfare. a. Which group of customers tend to pay the higher airfare: business travelers or leisure travelers? Why b.Why would business travelers tend to have a different elasticity of demand than leisure travelers? Is the more elastic submarket paying the lower or higher price? Is this consistent with an attempt to maximize revenues? Explain. Airlines might rely on a variety of restrictions in order to enable its customers to qualify for the discounts. These restrictions in effect roughly sort flyers into business travelers and leisure travelers c.Explain how each of the following restrictions used by airlines tends to sort its customers into business and leisure travelers Advance purchase requirements which require purchase at least 21 days in advance Weekend stay requirements which require that travelers stay over a Saturday night Time of day restrictions which disallow discounts during peak times of the day or during certain days of the week d.In each of these cases which group of customers (business or leisure) effectively pays a higher price? Is this consistent with profit maximization? Why? Show less
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