Pls help me with this!! 1500 pts to anyone who could perfectly answer this! 6. A
ID: 1097157 • Letter: P
Question
Pls help me with this!! 1500 pts to anyone who could perfectly answer this!
6. A new entrant, Bargain Airways, cuts air fares between Eastwich and Westwich by 20 percent. Biggie Airlines, which has been operating on this route, responds by cutting fares by 35 percent. What does Biggie hope to achieve?
7. If air transportation were perfectly contestable, why would Biggie Airlines (see discussion question 6) fail to achieve the ultimate goal of its price cut?
8. Which of the following industries are most likely to be contestable?
a. Aluminum production
b. Barge transportation
c. Computer manufacturing
Explain your answers.
9. Since the deregulation of air transportation, a community served by a single airline is no longer protected by a regulatory agency from monopoly pricing. What market forces, if any, restrict the ability of the airline to raise prices as a pure monopolist would? How effective do you think those market forces are in keeping airfares down?
10. Explain, for a repeated game:
a. Why it may be advantageous to have the reputation of being a tough guy who always takes revenge against anyone who harms your interests?
b. Why it may be advantageous to have a reputation of irrationality?
Explanation / Answer
6. This is an example of