[tb99]

> If economy passengers preferred better services to cheaper fare, they would have chosen airlines with better services

It's not quite that simple. Unless you fly a lot, it's hard to know about service differences between two airlines -- which has better air quality, more efficient disembarking, fewer recitals of the credit card pitch, etc. Passengers have to make their choices based on the subset of their preferences that they can actually compare, which is a pretty small subset.

Not that price isn't very important! But if I make my decision based on just (schedule, price, luggage policy, seat pitch, seat location), it's because that's all the info I've got.

[nairboon]

There is also the airline brand as an information. Some are explicitly branded as low-cost/low-comfort other not.