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Some airlines allegedly reduce fares on certain routes to a

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Director
Joined: 17 Oct 2005
Posts: 928
Some airlines allegedly reduce fares on certain routes to a [#permalink]

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24 Apr 2006, 15:10
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Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fare.

Which of the following, if true, most weaken the argument?

A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost

B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very liekly to do so again if new competitors emerge

C)As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.

D) ON deciding to stop serving particular routes, most airlines shift resources to other routes rather than the size of thier operations

E) When airlines dramtically reduce thier fares on a particular route, the total number of air passengers on that route increases greatly
VP
Joined: 29 Dec 2005
Posts: 1341
Re: airlines reduce fares CR [#permalink]

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24 Apr 2006, 15:28
B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very liekly to do so again if new competitors emerge
VP
Joined: 07 Nov 2005
Posts: 1118
Location: India

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24 Apr 2006, 20:29
Agree with B.
The argument is that once the company increases its fares, the competitor can hit back.
B states that if this happens then the company can again reduce its fares to drive out the competition.
VP
Joined: 06 Jun 2004
Posts: 1053
Location: CA

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24 Apr 2006, 21:42
Agree with the gang, B it is
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Director
Joined: 17 Oct 2005
Posts: 928

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24 Apr 2006, 23:05
oa is B
VP
Joined: 29 Apr 2003
Posts: 1403

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24 Apr 2006, 23:10
Late but B!
GMAT Club Legend
Joined: 07 Jul 2004
Posts: 5043
Location: Singapore

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25 Apr 2006, 01:24
1
KUDOS
A) Out of scope

B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very liekly to do so again if new competitors emerge

C) Out of scope

D) Out of scope

E) When airlines dramtically reduce thier fares on a particular route, the total number of air passengers on that route increases greatly

Between B and E, I would go with B. The argument in the passage is the strategy adopted by airlines to drive off competitors is not profitable in the long run, and any attempts to recoup these losses only results in inviting competitors to return.

B states clearly that a company that once underprices its fare to drive away competitor will not think twice about cutting their prices once more if new competitors emerge.

E is not very strong as it just goes to say that the total number of passengers on that route increases greatly. It does not take into account what happens when the airline attempts to recoup its losses.
Manager
Joined: 28 Mar 2006
Posts: 157

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25 Apr 2006, 08:47
Couldnt undrstand how the OA is B...
the question asks...to weaken the argument.
The argument here is:- Such pricecuts are not profitable in the long run.

Now to weaken this..we need something...which tells that these methods can be profitable in the long run.
B...seems to do the opposite...it says..that once a company reduces its fares..it is likely to do again to drive away the competition.....

I want to know..whether these futher price cuts...help such companies by driving away the competitors...or are harmful for these companies coz..they hav to reduce the price again n again..n thus ll never be able to get profits...by selling tickets at too low a price.

Please explain where I am wrong..
Senior Manager
Joined: 24 Jan 2006
Posts: 252

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25 Apr 2006, 12:51
agree with B
SVP
Joined: 14 Dec 2004
Posts: 1689

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25 Apr 2006, 19:35
B it is.

Only B attacks the argument.
25 Apr 2006, 19:35
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