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The CEO of a regional airline recently learned that its only competitor is suffering from a significant cash-flow constraint. The CEO realizes that its competitor's days are numbered, but has asked whether you would recommend the carrier significantly lower its airfares to "speed up the rival's exit from the market."
Which of the following are issues you should present to the CEO for consideration before engaging in this strategy?
For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.
Check all that apply
-Consider the possibility that such behavior may trigger action by antitrust authorities.
-Verify that the present value of the benefits from speeding up the rival's exit exceeds the up-front cost of doing so.
-Assess the likelihood of another airline entering the market after the rival exited.
-Consider using penetration pricing instead.
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