I was shocked that I didn't have Internet access last night on my 4 hour flight from Chicago to Los Angeles. Now that I have read this article I see that United is lagging far behind other airlines including Southwest. I was ready to buy the $8 Internet access but they wouldn't sell me this product. What happened to complete markets? Can I contact Arrow or Debreu?
Let's do some economics here. Suppose that a typical United Airplane flies 3 times a day and has 200 seats. If everyone bought the internet package, this would yield $8*3*200 = 4800 worth of revenue a day per plane. If the plane flies every day and the plane lives for 10 years, then assuming an interest rate of 0% this yields a present discounted value of revenue = 4800*365*10 = $17.5 million dollars. Are you going to tell me that this investment doesn't have a positive PDV?
I realize that not everyone on board will use this product. I realize that there are fixed costs to install wifi and maybe some marginal costs but do you see my point? You can incorporate your assumptions into my spreadsheet but the revenue stream will still be huge. United has been concerned about its low revenue. Read this article in the Chicago Trib.
