question archive A town with a small airport is served by two competing airlines
A town with a small airport is served by two competing airlines
Subject:EconomicsPrice:2.87 Bought7
A town with a small airport is served by two competing airlines. Which of the following strategies would make the airlines more likely to compete on price?
The airlines fly identical planes, with the same type of seat and the same amount of legroom for customers
One airline offers meals on board every flight while the other serves no meals but has fewer delayed flights
Each airline offers flights to a different set of other cities
The airlines offer loyalty programs, motivating existing customers to continue to fly with them
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Answer:
Only two airlines operate from the stated small airport.
Firms generally compete on price when the product offered by them is identical. In other words, if product of two firms cannot be differentiated then only way for them to compete with each other is on basis of price.
So,
If the airlines fly identical planes, with the same type of seat and the same amount of legroom for customers then with such strategy, the airlines would more likely to compete on price.
Hence, the correct answer is the option (1).
