this post was submitted on 20 Jan 2024
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"People don't want to pay what you're charging so you should drop the price"
AA: "No"
Repost to scare an economics 101 class.
Would this technically be anti-capitalistic? They're refusing to charge what the market will bear.
More like a supply and demand issue I would think, the issue here being there is no demand for first class seating so they are limiting the amount of "supply" of those seats to accommodate for less demand. Some airlines don't offer first class seating at all, like Southwest.
There is demand for first class seating from nearly 100% of fliers. They're just not willing to pay what AA is charging. This isn't a supply and demand decision. Econ 101 says that means AA should reduce the price, but capitalism in practice says the constant desire for more profit and the monopoly that most industries have been allowed to grow and maintain means never lower the price and find a new way to fuck the plebs who don't even own a single yacht.
That is the definition of no demand. Whether customers don't want your product or the price you're charging, it's the same. It's then up to your business decision which way you go from there, increase coach seats or lower the price of first class. Make the right choice and you stay in business.
In this market I imagine this has transpired:
Employee: “Customers are not seeing the value on the service priced at 4X of an economy seat. Let’s offer first class at a discount. Market research shows customers willing to pay a premium markup of up to 2X for it.”
Boss: “Great idea, let’s increase plane occupancy by making more economy premium seats and marking up all of them 2X!”
Boss gets bonus for innovation and promotion. Employee gets RTO orders, 1% merit increase, 2% COLA adjustment and a pizza party from the boss to thank for being part of the AA family!