Question

1. Two airlines have market power on different routes. Sprint is the only airline on the route from A to B, and Beta has the only flights from B to C. Sprint can sell a flight from A to C to consumers by buying a flight from Beta on the B to C route. Why might you expect that this flight will have a higher price than if Sprint had the only flights on the routes B to C and A to B?

Answer 1

Sprint can sell a flight from A to C to consumers by buying a flight from Beta on the B to C route. I expect that this flight will have a higher price than if Sprint had the only flights on the routes B to C and A to B. The sole reason for this to happtis because of sprint wants to start a flight from A to C it'll have to buy a flight from Beta, which means a lot of additional costs eventually. To cover these costs and to gain profits for this new route sprint will go for high pricing strategy for the route A to C.

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