I’m not sure I agree with the premise. Given the examples in the article, seat space is not limited just to upsell customers. Smaller seats means more fares. Similarly, priority boarding became a thing when airlines started charging $40 for checked bags, and thus overhead space became a coveted commodity. There is surely a sweet spot, however, where upselling is valuable (that is, the marginal price of an upgrade is a lot higher than the marginal cost for the airline).