Originally Posted by ehlfg
I've seen this argument here many times, but I must confess that I don't really understand it. If I'm unwilling to pay $1M for a Ferrari Enzo, that doesn't mean that the car is worth less than $1M if there are enough other people who are willing to pay that much for it.
What does make sense to me is that a saver award ticket is worth somewhat less than a discount (e.g., Z class) revenue ticket because it is (more) capacity controlled and doesn't earn miles. But I don't understand why it's worth much less than that. By the same measure, why isn't a standard award ticket worth somewhere between a discounted and full-fare revenue ticket -- regardless of whether I'd be willing to pay for the revenue ticket?
I should note that I am sadly under-educated on economic and finance matters. So I'm happy to learn from the better informed about how to value miles.
If you could acquire for $400K a luxury car that retails for $1M, it would make sense to do so, even if you would have no interest in owning such a car at a much reduced price. It would make sense because though you might not be able to resell the car for the same $1M that the dealership can sell it for, it probably would not be hard to resell it for $700K, and thus you could realize a substantial profit by flipping the deal ($700K - $400K = $300K profit). That is a quite different matter from buying frequent flyer miles and imputing to those miles a very high value based on use for international first when you wouldn't fly international first otherwise.
The airline miles you would buy by paying the "convenience fee" required to use a credit card for taxes can't be resold like that deeply discounted Ferrari, or not easily and without risk. So if you are buying them the analysis should be what are they worth to you, not what might they be worth to someone else.
I don't agree entirely with the "pragmatic" analysis put forward by
Efrem, but I do think he has a point about not overvaluing these miles and using a more reasonable measure of their value than the absolute highest value they
could be put to.