A leading airline firm increases the airfare for its business and first class passengers on high-density routes. This aids in reducing the prices for economy class passengers on low-density routes. This is an example of ________.

Question

Quizplus · Accepted Answer

This is an example of cross-subsidization, where profits from one segment of customers are used to offset losses or offer lower prices to another segment. In this case, the higher prices for business and first class passengers on high-density routes are used to subsidize lower prices for economy class passengers on low-density routes.

A Leading Airline Firm Increases the Airfare for Its Business