Explain why airlines might be more likely to match price

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Reference no: EM13148670

Consider the following two excerpts from articles in the Wall Street Journal: (From Feb. 2003) An attempt by major airlines to raise fares $20 per roundtrip ticket fell apart over the weekend as Northwest Airlines, the fourth largest carrier, refused to go along … By yesterday morning, all airlines had rolled back prices. (From Aug. 2003) Northwest Airlines triggered a major round of discounting last week when it launched a fare sale for late summer and early fall travel – setting off a chain reaction in the industry. During the course of one day, airlines cut fares on nearly 35,881 routes. (a) Briefly explain why airlines might be more likely to match price cuts than price increases. (b) Which theory of oligopolistic behavior does the above situation most resemble?

Reference no: EM13148670

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