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Some airlines allegedly reduce fares on certain routes to a

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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 17 Dec 2016, 17:01
B makes sense. I chose E as a result of forgetting it was a "weaken" question. Good thing it's only practice.

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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 10 May 2017, 05:40
Thanks milo for the explanation. :)

Now i am clear why the option is B and not E.
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Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 25 Jun 2017, 09:04
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Here is why E cannot be right.

From the argument:

Quote:
Some airlines allegedly reduce fares on certain routes to a level at which they lose money,


In other words, while holding fares at the level necessary for driving away competitors, the airline doing so loses money.

Here's what E says.

Quote:
E. When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.


Notice, what E say does not undermine the conclusion, because even with the increase in passengers mentioned in E, the airline offering the lower prices will continue to lose money. A money losing fare level is a money losing fare level regardless of how many passengers an airline has at that level. So, adding the information provided by E does not change the conclusion that the strategy is not profitable.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 17 Sep 2017, 08:13
Hoping that experts would help me out here with the reasoning - I was stuck between B and E and picked E.
How does B win over E?
(B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge. - This means that competition won't enter the market of that particular route; cause the initial company would reduce its prices again. A contender

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.This means that the particular airline would make profits, another contender

So one talks about profit (E) and one talks about competition (B); and both weaken - can anyone help me on this?

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Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 19 Sep 2017, 18:31
Madhavi1990 wrote:
Hoping that experts would help me out here with the reasoning - I was stuck between B and E and picked E.
How does B win over E?
(B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge. - This means that competition won't enter the market of that particular route; cause the initial company would reduce its prices again. A contender

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.This means that the particular airline would make profits, another contender

So one talks about profit (E) and one talks about competition (B); and both weaken - can anyone help me on this?


One key to getting the correct answer to a CR question is being very clear regarding what conclusion you are seeking to weaken or strengthen.

Here is the conclusion to this argument in this question.

this method of eliminating competition cannot be profitable in the long run.

Notice, in order to be profitable, the airline has to increase fares.

E does not indicate that the airline will be profitable, as E says what will happen when the fares are STILL DRAMATICALLY REDUCED. As long as the fares are dramatically reduced, the route will not be profitable no matter how many passengers take that route.

B, by indicating that it is likely that other airlines will stay out of the market even if the airline controlling the route increases prices, shows a path to profitability for the airline that took control of the route by underpricing the competition.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 19 Sep 2017, 21:26
I would go with D. The argument is that the competitors will come back once the airline starts increasing the fares. The option D says that if an airline goes out of the particular route, it is not easy for it to come back. Hence the airlines that are thrown out of competition cannot easily come back.

Hence according to me, D is the best answer.

Please correct me if I'm wrong.

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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 20 Sep 2017, 00:12
GMATcrusader_17 wrote:
I would go with D. The argument is that the competitors will come back once the airline starts increasing the fares. The option D says that if an airline goes out of the particular route, it is not easy for it to come back. Hence the airlines that are thrown out of competition cannot easily come back.

Hence according to me, D is the best answer.

Please correct me if I'm wrong.


One way to look at it is to identify the conclusion. The conclusion is "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 fares". Remember, we want to weaken this conclusion.

Let's look at (D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
This choice fails to weaken the conclusion. It does not state anything to how it could weaken that conclusion that we had above. Notice how it also changes the focus away from the conclusion.

However answer choice (B) does so. It states that "Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge." Thus, it says that even if new competitors emerge, it will implement its previous strategy of underpricing. This weakens the argument because in the argument it essentially said otherwise. The conclusion stated that new competitors would emerge and cut the airline's fare.

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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 25 Nov 2017, 16:49
Conclusion: this method of elimination cannot be profitable in the long run.

Choice B shows a situation where the airline will charge higher fares with no competition, leaving the money losing fares and thus making profit in the long run.

Choice E point is that revenues will increase even if fares are kept low, but we don't know whether that will be enough to cover the costs. This choice does not ensure profitability, so it does not weaken the conclusion.

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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 26 Nov 2017, 00:28
I want to understand why option E is incorrect. In the long term, profitability may be sustained because of more number of passengers that the airlines managed to attract.

Whereas in option B, the airlines will again decrease prices thereby affecting profitability further.

Need an expert's opinion on this question.

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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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New post 28 Nov 2017, 20:53
Nikhil_as wrote:
I want to understand why option E is incorrect. In the long term, profitability may be sustained because of more number of passengers that the airlines managed to attract.

Whereas in option B, the airlines will again decrease prices thereby affecting profitability further.

Need an expert's opinion on this question.

Choice (E) only tells us that we will have more customers "when airlines dramatically reduce their fares on a particular route." But what will happen when the airline increases its fares? Will those customers stick around? If they do, will other airlines offer lowers prices to undercut the increased fares?

The author of the passage would argue that an increase in the popularity of the route wouldn't help of those customers just end up flying with competitors once we start charging higher fares to recoup our earlier losses. Thus, choice (E) doesn't impact the author's specific argument and should be eliminated.

Notice the words "for an extended period" in the passage. The author's concern is that if the airline charges higher fares for an EXTENDED period, then eventually rivals will undercut those prices. Choice (B) tells us that the airline can charge higher fares for a while and then, after an EXTENDED period, reduce the fares again if needed to drive away competitors. Even though the airline has to repeatedly lower its prices, with each cycle they'll enjoy an EXTENDED period of charging higher fares and recouping their losses.

I hope that helps!

In other words, the airline would take some losses and then gain them back by charging higher fares for a while. If competitors try to undercut the airline, they'll simply slash fares again for a while to drive out the competition and then repeat the cycle.
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