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

Predatory pricing is a strategy used by dominant firms to drive out competitors from the market by pricing at below-cost levels for a long period. In this case, the major airlines matched the low fares of People's Express until they went out of business, and then increased their prices back to their previous levels. The judgment against them concluded that this was an explicit attempt to destroy a competitor, making it an example of predatory pricing.

The Early 1980s,typical Round-Trip Coach Airfares from the East Coast