What fare would maximize profit earned from each customer

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The year is 2020 and the U.S. airline industry has been radically transformed through a recent wave of mergers. Only one company, MONO Airlines, has managed to survive the succession of price wars, labor-management disputes, and government policy reversals that plagued the industry in previous years. MONO now seeks to make the most of its exclusive hold on the market. To that end, it adopts a new slogan, "Fly MONO - or Walk," and then hires you as a consultant to offer advice on its pricing policy. Specifically, MONO asks you for advice on how much to charge for its one-way flight from Boston to New York City. You are informed that the one-way marginal cost for each passenger is $40. You are also told that there are two types of customers: well-paid business executives, and less-advantaged students and tourists. The demand by each of these types of customers is shown in the table. One-Way Trips Demanded Per Year (in Thousands) Price of One-Way Ticket Executives Students/Tourists $140 0 0 $130 8 0 $120 9 1 $110 10 2 $100 11 3 $90 12 4 $80 13 5 $70 14 6 You recommend that MONO charge different prices to the two different customers groups. If MONO charges different fares, what fare would maximize the profit earned from each customer group?

Reference no: EM13220181

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