But we in The New Economy live in Looking Glass World, not The Real World. In Looking Glass World we manufacture spend and save our money by running up credit card debt and loose our money putting it in savings accounts where any amount below a minimum balance might be assessed bank fees. So you have to add that people may be quite rational, but motivated by unseen factors. Hence the crazy customer waltzing into the bank with a dolly containing $75,000 in boxed dollar coins, stocking out money orders at a WalMart, or buying enough pudding cups to feed the state of Rhode Island may actually acting quite rationally in a world that has gone crazy.
Originally Posted by
sk8uno
Sorry if I was unclear -- I was talking about airfare, not mergers and acquisitions. My point is that even if people can fly LAX-NYC for $x or they can buy 25,000 miles for $x-10 and use those miles to fly LAX-NYC, many people will still buy the revenue ticket. By the "corporate context" above, I meant corporate travel. But this happens even among leisure travelers.
Your statement that "no one would ever pay more than the cost to purchase [miles] outright" assumes people are (a) rational, and (b) have perfect information. **Both of those assumptions are often wrong in the real world.**
All of this also ignores the fact that booking an award ticket comes with additional annoyances and restrictions. But even assuming booking award tickets and buying miles do not entail any additional transaction costs over buying a revenue ticket, I still stand by my statements.
