Which of the following explains why frequent flier programs reduce contestability in the airline industry?
A) Frequent flier programs make demand for each airline more elastic and thus lead to more competition.
B) Frequent flier programs make demand for each airline more inelastic and thus lead to more monopoly power and higher prices.
C) Frequent flier programs increase demand for each airline, ultimately leading to increased competition and lower prices.
D) Frequent flier programs lead to lower switching costs and therefore less contestability in the market.
Correct Answer:
Verified
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