Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 1

Between 1995 and 1997, American Airlines competed in the Dallas/Ft Worth Airport against several other low-cost carriers. In response to these low-cost carriers, American Airlines reduced its price and increased service on selected routes. As a result, one of the low-cost carriers stopped service, which led American Airlines to increase its price. Why do you think a lawsuit was filed against American Airlines? Why do you think American Airlines prevailed at trial?