Some budget airlines have unbundled traditional air- fares by separating the seat from other ancillary service components by charging separate fees for baggage, head- phones, in- flight meals, issuing boarding passes etc. While this strategy allows the airline to advertise highly competitive fares, in practice it has annoyed customers. Customer responses to these unpopular additional charges are BEST explained by which of the following concepts from behavioural economics?

Question

Quizplus · Accepted Answer

Segregated losses explain why customers are annoyed by additional charges. In behavioral economics, segregating (separating) losses, like individual fees for services that were previously bundled, is perceived more negatively by consumers than a single, integrated cost, leading to annoyance or dissatisfaction.

Some Budget Airlines Have Unbundled Traditional Air- Fares by Separating