By Darin Lee
This can be the 1st in a brand new sequence of books at the economics of the airline undefined. The sequence is a set of unique, state-of-the-art learn papers from a global panel of distinctive participants. quantity 1 will specialise in themes concerning festival coverage and antitrust, similar to the industrial impression of airline alliances (both overseas and domestic), predation, and incumbent responses to not pricey access. a part of a "New Series", this quantity specializes in pageant coverage and antitrust. Its members are overseas specialists within the box.
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Extra resources for Advances in Airline Economics, Volume 1: Competition Policy and Antritrust (Advances in Airline Economics)
824 F. Supp. D. Tex. 1993). 16 A discussion of this case is given in Clouatre (1995). 17 This summary of the plaintiffs’ position was obtained from a review of various transcripts from the case. 18 See Clouatre (1995, p. 893). , Baumol, 1996), defendant’s expert Professor Baumol listed three necessary components for firm conduct to be predatory: (1) no legitimate business justification, (2) prices so low that they constitute a threat to an equally efficient rival (the Areeda-Turner test would be the test for this), and (3) recoupment of the costs of the predatory strategy.
It does not appear that the Federal Cartel Office considered whether the entire route, or specific flights, were covering the costs of offering those flights, considering all revenues attributable to the flight. Therefore, it remains in considerable doubt whether Lufthansa would have failed an avoidable cost test of the sort being applied in other jurisdictions. Finally, the Lufthansa decision makes a very strong statement regarding the legiti macy of price matching, by arguing that fares above Germania’s fares in fact represented undercutting once product differentials were taken into account, and by providing an estimate of the value to consumers of this product differential.
4 CONCLUSION Our review finds no evidence that predation by major carriers against low-fare entrants, if it existed, was systematic and successful during the mid-1990s. Indeed, we find that lowfare carriers continued to enter O&Ds throughout the 1990s, and those entries typically were successful. Furthermore, we find that the continued growth of low-fare carriers after 1999 is not associated with less aggressive pricing responses by major carriers to entry than in earlier years. Although our analysis cannot rule out isolated instances of predatory conduct, the evidence shows that the type of fare responses that concern critics of major carriers’ pricing practices are relatively rare and also occur in response to entry and exit by major carriers.