Why do airlines charge for seat selection?
Because unbundling — separating the seat from the fare — lets an airline advertise a lower headline price while recovering revenue from people who care where they sit, and because it turns out a great many people care a great deal.
The commercial logic. Airlines compete on displayed price, since booking sites sort by it. Removing anything not strictly necessary from the base fare lowers that number. Seat selection, baggage, priority boarding, meals and changes then become separately priced — ancillary revenue, which has grown to a very substantial share of many airlines' income and is more profitable than the ticket itself.
Why it works so well. It is price discrimination: leisure travellers who care only about cost pay less, while those with a preference — families, tall passengers, nervous flyers, anyone wanting to disembark quickly — pay more. Both groups are on the same aircraft paying different amounts, which extracts more revenue than a single fare can.
The families question, which attracts most criticism. Where seats are assigned randomly to those who do not pay, families can be separated — including from young children — which many people regard as effectively compulsory. Regulators in several countries have examined this, and some airlines have committed to seating young children with an adult without charge. The practice varies, and it remains the sharpest consumer objection.
What you are actually buying, which differs by seat: extra legroom, which is a genuine product; exit rows, which carry responsibilities and restrictions; front rows for faster disembarkation; and simply certainty, which is the largest category.
How to avoid paying, where you can: check in at the earliest permitted moment, since free assignment frequently improves with early check-in; travel light and board early; hold airline status, which usually includes selection; book directly, since some fares include it; and accept that on many carriers a group travelling together will be seated together anyway because the aircraft is not full.
Check what your fare includes before comparing prices — a cheaper fare plus seat and bag charges is frequently the more expensive option.