The Airline Oligopoly

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When only a few sellers offer a product with little regard to competition it is called an oligopoly. It is different from a monopoly because multiple corporations are involved, but the effects on the consumer are the same - bad. Although competition is usually in the best interest of the consumer, it is not always in the best interest of the corporation. If we examine the two leading soft drink producers, Coca-cola and Pepsi-cola, we see a prime example of an oligopoly (Zachary, 1999). As things are presently, each of these soft drink companies has about half of the soft drink market, and examined from a world-wide perspective that is a pretty large market. Either one of them, Coke or Pespi, could conceivably lower their prices in the hopes of gaining a greater market share, but doing so would cut into profits considerably, and with no real hope of driving the other Corporation out of business, this strategy doesn't seem to make much sense. Coke and Pepsi have a competitive alliance, charging about the same prices and maintaining healthy profits, while fostering the illusion of competition through their creative advertising. Under regulation, this is essentially the same relationship that the airlines had with each other. Airlines did not compete, they co-existed. When profits were low for the airline industry, prices went up across the board. The only difference between regulation and an oligopoly is under regulation the airlines did not choose to not compete, it was simply not permitted. Regulation was a government mandated oligopoly and most of the airlines didn't want it any other way. It should be of little surprise then that ever since the airline industry was deregulated in 1978 there has been a steady move tow... ... middle of paper ... ...on and protect the passenger. When it comes to purchasing anything, whether it is airline tickets or computer software, consumers should at the very least be given a chance at a choice. References Butler, G.F., & Keller, M.R. (2001). Handbook of airline strategy. New York, NY: McGraw-Hill. Kane, R.M. (2003). Air Transportation. Dubuque, IA: Kendall/Hunt Publishing. Petzinger, T. (1995). Hard Landing. New York, NY: Random House. Surowiecki, J. (1998). Airline deregulation's fair weather friends. Retrieved November 7, 2003, from http://slate.msn.com/id/2642/. Zachary, G.P. (1999). Many Industries are Congealing Into Lineup of Few Dominant Giants. Wall Street Journal. Retrieved November 7, 2003, from http://www.writght.edu/~tdung/oligopoly.htm .

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