Originally Posted by MarkOK

The supply/demand dynamics is about selling the actual tickets. The seat calculations are about ancillary revenue.

For example, if AA sells 5 out of 20 premium marked seats at $100, they make more than selling 10 of 20 premium seats at $40. And, there is nothing in these prices that would have to change if AA doubles the number of premium marked seats to 40, or halves it to 10. The product doesn't have to clear; and it rarely if ever clears. For full flights, MCE is nearly all elites and BE passengers who got their seats assigned at the gate.

For Supply/demand pricing dynamics to makes sense, an increase in supply corresponds to a lowering of price to clear that product. Premium choice seating, if anything, works in reverse. By increasing the supply to 40 seats, you will increase demand at least slightly because you are taking the competing product --free seats-- away. A few people will simply throw a benjamin down to sit closer the front on a aisle, but there are a lot of couples and families that will choose any set of free seats together than pay for it, unless, paying for it is the only way they can get seats together.

To add -- pull any seat map for a flight next week and you will most likely see lots of green and orange seats (entire rows even!) and a scant scattering of isolated blue seats. Example I randomly pulled: AA2386 July 7 -- aircraft A321: 14 MCE, 11 green seats, 9 free blue seats (all isolated, most middle seats). So, 74% of the seats remaining on a flight a week out are extra $$ seats. There isn't some sort of a inherent demand in the public to sit forward of the wing. The public will pretty much choose any free seat first. But, now that those are gone, if even a couple wanted to fly and sit together, you'd need to cough up $50 one way to make that happen. The fact that there is an outsized number of green seats beyond the demand for them increases the probability that someone will pay any given price for it. That isn't supply/demand, that is rent-seeking.

On their 767 international flights, AA would block every aisle seat green almost all the way to the last row, in effect forcing any couple to pay for a premium seat just so they can travel together. If it wasn't for a chance status challenge that got me some instant status several years ago, I was about to pay $300 roundtrip ontop of a $600 ticket JFK-CDG just so that my wife and I could sit together on the flights vs the very real possibility of us each sitting in a middle center seat on different rows. (And, other than an international flight, we would never, ever, pay the ridiculously high fees for green and blue seats that AA prices them out).