In the early 1980s, typical round-trip coach airfares from the East Coast to London were more than $500. Then Freddie Laker introduced the People's Express, a competing service into Newark at $350. Major airlines matched his price-and continued to do so until they drove People's Express out of business. Then prices shot back up to over $500. A lawsuit filed under the Sherman Act resulted in the judgment that the major airlines had explicitly tried to destroy a competitor. The experience of People's Express is an example of __________ on the part of the major airlines.

Question

Quizplus · Accepted Answer

The experience of People's Express is an example of predatory pricing on the part of the major airlines, where they drove a competitor out of business by drastically reducing prices until the competitor couldn't sustain profits.

In the Early 1980s, Typical Round-Trip Coach Airfares from the East