Trading in the presence of priorities Suppose there is an airline that wants to sell 200 seats in a flight. It can either sell them as business class or as economy. Ideally it would sell all  as business class, but it is willing to give away seats as economy in case not all can be sold as business class.

Then there is a number of consumer, which all prefer economy seats, but each of them is willing to buy business class in case no economy seat is available.


Is this a well-known problem?
What is it called?


Edit:

I suppose this is roughly a "game of chicken". But I believe in real markets there will some equilibrium, but I don't know what it depends on.
If I understand you correctly, all customers prefer economy class to business class (that is, they only care about the lower price).

First, the way you've specified the problem, the airline will always make every seat a business class seat, because if no economy seats are available, the airline will (a) sell the same number of tickets (since customers buy business class if economy isn't available) and (b) sell all the tickets at a higher price.

But maybe you meant something like, fewer people will buy business class seats because the price is higher, so the airline may wish to make some seats economy class so they fill every seat. That is, the airline may initially wish to offer tickets for business class, wait until they stop getting new orders, then lower the price to economy class in order to fill the rest of the seats. Depending on the underlying model of demand and purchasing you may get different results.

I'll highlight one, the 'Coase conjecture', which argues that the sort of pricing scheme I described above will break down because customers rationally anticipate that the airline will lower prices as soon as they stop getting new orders, so they wait for the price to drop.