Macmillan Leaming Monopolistic Competition, Oligopoly and Game Theory End of Chapter Problems Low-fare carriers such as Spirit, Allegiant, and Frontier have been successful at gaining market share by offering low base fares but then charging for everything from seat assignments to snacks to carry-on bags. What action would you recommend to the major airlines (Delta, United, and American) to avoid a prisoners' dilemma outcome? The major airlines should: Merge together to form a single competing airline, which would create cost savings and economies of scale. Decrease the prices of all their tickets so as to compete with the low-fare carriers. Break up their companies into more numerous firms, which would provide greater competition to the low-fare carriers. Create a new class of tickets that will be priced lower and offer fewer amenities, which would compete directly with the low-fare carriers.
Macmillan Leaming Monopolistic Competition, Oligopoly and Game Theory End of Chapter Problems Low-fare carriers such as Spirit, Allegiant, and Frontier have been successful at gaining market share by offering low base fares but then charging for everything from seat assignments to snacks to carry-on bags. What action would you recommend to the major airlines (Delta, United, and American) to avoid a prisoners' dilemma outcome? The major airlines should: Merge together to form a single competing airline, which would create cost savings and economies of scale. Decrease the prices of all their tickets so as to compete with the low-fare carriers. Break up their companies into more numerous firms, which would provide greater competition to the low-fare carriers. Create a new class of tickets that will be priced lower and offer fewer amenities, which would compete directly with the low-fare carriers.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Macmillan Leaming
Monopolistic Competition, Oligopoly and Game Theory
End of Chapter Problems
Low-fare carriers such as Spirit, Allegiant, and Frontier have been successful at gaining market share by offering low base fares
but then charging for everything from seat assignments to snacks to carry-on bags. What action would you recommend to the
major airlines (Delta, United, and American) to avoid a prisoners' dilemma outcome?
The major airlines should:
Merge together to form a single competing airline, which would create cost savings and economies of scale.
Decrease the prices of all their tickets so as to compete with the low-fare carriers.
Break up their companies into more numerous firms, which would provide greater competition to the low-fare carriers.
Create a new class of tickets that will be priced lower and offer fewer amenities, which would compete directly with the
low-fare carriers.
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