Question: Question 3 (20 Points, 15 Minutes) SU-Airlines Offers Domestic Flights In Turkey. After Conducting A Market Analysis, The Firm Realizes That The Company’s Market Includes Heterogeneous Customers Along Two Dimensions: Valuation Level For Its Flights And Booking (or Reservation) Time. Customers Can Be Grouped Into Two Segments: Segment A And Segment B. …

Question 3 (20 points, 15 minutes) SU-Airlines offers domestic flights in Turkey. After conducting a market analysis, the firm realizes that the company’s market includes heterogeneous customers along two dimensions: valuation level for its flights and booking (or reservation) time. Customers can be grouped into two segments: segment A and segment B. Segment A customers are less price-sensitive than those customers who belong to segment B. However, segment B customers make their reservations earlier, i.e., at least six weeks prior to the departure of a flight, and segment A customers make their reservations at most six weeks before a flight’s departure. Suppose a flight operated by SU-Airlines from Ankara to Erzurum has 150 seats, and the market demand for this flight can be given by D(p) = 900 – 2 x p. The current pricing policy the company exercises can be stated as follows: “The company charges $300 per seat if customers reserve their seats at least six weeks prior to its departure. Otherwise, if there are less than six weeks prior to its departure, customers must pay $310 per seat”. Does the firm achieve the highest revenue with the current policy? If your answer is “yes”, show that the total revenue that SU-Airlines earns via the current approach cannot be attainable by any other pricing strategy. In other words, show that the firm achieves the maximum revenue with the current strategy. If your answer is “no”, develop a pricing strategy that generates higher revenue than the current scheme. Conduct your analysis in the sheet “Question 3″ of the “midterm I question 3.xlsx” file.