The US Department of Justice and predatory pricing

Problem Set 7 Key r 6 -16


Don't use plagiarized sources. Get Your Custom Essay on
The US Department of Justice and predatory pricing
Just from $10/Page
Order Essay



1.       Between 1995 and 1997, American Airlines competed with several low-cost-carriers on routes from Dallas/Fort Worth.  The US Department of Justice sued alleging predatory pricing.  A judge disagreed.  Read this article from the Wall Street Journal (available through the Hunt Library ProQuest database):




Wilke, J. R., & McCartney, S. (2001, April 30).  American Airlines secures antitrust win — Judge dismisses U.S. case, says competitive moves were company’s right.  Wall Street Journal (Eastern edition), pp. A.3.




The antitrust legal standard for predatory pricing is pricing below variable or marginal cost.  Discuss why the plaintiffs lost this case in the face of what most lay people would consider predatory pricing.  Hint:  Consider how to compute marginal cost for an airline.




2.       The archetypal low-cost-airline operates a point-to-point route structure with no passenger connections available to other flights in the LCC’s route system.  If an LCC is operating a 150 seat aircraft in city-pair A-B, how many passengers must be bound for B to achieve an 80% load factor (don’t overthink this, it’s easy!)?




3.       Most large airlines operate networks, or hub-and-spoke systems, which connect many spoke cities (or nodes) with flights to and from a hub airport.




a.       A network carrier serves 39 spoke cities from a single hub.  How many city-pairs does it serve?  (A city-pair is City A to City B.  City A to City B and City B to City A are consider just one city-pair)




b.       This same airline adds a 40th spoke city to its network serving the city with a 100 seat capacity aircraft. Consider the morning flight from this new spoke city to the hub.  How many passengers on average does the airline need to attract to each of the possible network destinations to achieve an 80% load factor on this flight?


c.       How can a network airline profitably serve smaller cities than a low-cost-airline? (Hint:  Consider 2b above).




d.       A network carrier serves some small cities close to its hub with regional jets which have much higher seat-mile-costs (CASM) than larger mainline jets.  The average fare from these cities to the hub does not cover fully allocated costs.  Is this rational?




e.       Networks are subject to negative externalities.  How might such externalities affect a network carrier’s decision to add another spoke city to its network?  Explain.  (You may wish to use marginal benefit/cost analysis).




4.       In the early 1990s, Airbus and Boeing were both considering building a new Very Large Aircraft (VLA).  Airbus faced this decision tree.  Boeing’s decision was similar.  Why did only Airbus build the VLA, the A-380?  “A” in the decision tree is Airbus and “B” is Boeing.  “Build” indicates the decision to build the VLA and enter the marketplace.  Similarly, “Don’t Build” is a decision not to build a VLA and not to enter the marketplace.  The numbers in parentheses indicate the 20 years incremental profit in billions of dollars for Airbus and Boeing.











Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

Read more

Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Open chat
You can contact our live agent via WhatsApp! Via +1 817 953 0426

Feel free to ask questions, clarifications, or discounts available when placing an order.

Order your essay today and save 30% with the discount code STARS