All the comments I am making are regarding economy. That’s why I mentioned European business class - it doesn’t really exist. Economy plane tickets are factually extremely price sensitive.
My point was that the model of selling space is not new at all and is very well established, and used where its profitable. It’s not something that hasn’t been thought of and it isn’t as simple as making the notional total cost of the seats the same. They have to be sure they can sell all of those seats and also make up the lost revenue from ancillary charges (baggage, seat charges, on board purchasing, advertising).
I am only talking about premium because it is a working example. The OP was on a 4 hour flight - airlines don’t even offer premium economy on these flights. They are not profitable because the demand is not there. If it did, it would be there.
Airlines have hundreds of MBA qualified economic specialists managing revenues in an incredibly complex system. An individual flight doesn’t need to turn a profit, some routes rarely see profit but the overall model has to work in conjunction with the fuel, airport and cargo industries.
Pricing is very dynamic which is why you get the anomalies you mentioned like a premium economy seat costing almost as much as business sometimes. Sometimes it will be just a bit more than economy - I am travelling this summer and the PE difference was very small which is why we paid it (family of 5 and the costs add up, we don’t always. It depends solely on how confident the airline are that they will sell that seat on that plane on that day and, importantly, how much they want to sell it at that time. I booked early during a sale. Some seats which are sold early will be sold over and over again as people cancel and change (and a huge amount of those costs are retained by the airline) but the airline wants secure a certain of booking on the plane early on. This is revised constantly.
For a real horror story Google standing ‘seats’ on two hour flights!
I’m not trying to win an argument, i just like economics and travel a lot for work. I was at an airport when I posted in the middle of the night. I find it all fascinating.