> But they would very likely just sell more tickets, as their 3rd class was now the best in the business. IMO, you're simply begging the question by presuming

> But they would very likely just sell more tickets, as their 3rd class was now the best in the business. IMO, you're simply begging the question by presuming that 2nd class won't be cannibalized. We're also forgetting that one can't simply increase ticket supply, because trains and airlines are capital constrained once you run out of seats. At best, you can hope to charge more for 3rd-class tickets, at the expense of having cheaper, or empty, or fewer 2nd-class seats. Even if a company manages to raise price of 3rd-class tickets, they face both a 1) lower effective subsidy from 2nd class and 2) the cost of providing 3rd-class amenities. Which effect dominates very well depends on the relative preferences of 2nd and 3rd-class buyers. The sweet spot is to find an inconvenience that only affects 3rd-class ticket-holders a little bit, but annoys 2nd-class ticket-holders a lot. The Eurostar is a good example of that -- most people aren't inconvenienced too much by being told their flight time 2 days in advance (so depresses economy ticket prices only slightly), but deep-pocketed business travelers find it completely unacceptable (which shifts effective demand to the business seats).