Question: The U.S. Justice Department has been worried that the nation's four largest air carriers-Delta, Northwest, American, and United-use low prices to limit competition at the busiest airports. Predatory pricing exists when the dominant carrier at an airport matches the low prices of any new low-fare competitor and sells more low-fare seats. The major carrier holds these low prices until the new competition folds. The dominant carrier recovers any short-term losses with increased fares once the competition is eliminated. The government thinks that this pricing response is an anticompetitive strategy. The dominant carriers claim that this response is simply a part of competition. Which is it? How would each of the following pieces of information affect your decision as to whether it is an anticompetitive strategy or a competitive response? Check the appropriate column.
