Question

In the late 1990’s, Vanguard Airlines operated as a low-cost carrier, offering low prices and limited services, out of Kansas City, Missouri. Not long after its inception, Vanguard began offering a significant number of flights based out of Midway International Airport in Chicago, Illinois as well. When Vanguard expanded to Midway, incumbent airlines, such as Delta, quickly responded to its low fares by offering many competing flights at comparably low prices. The intense price competition ultimately caused Vanguard to exit Midway in 2000 and file for bankruptcy in 2002. At varying points in time, the airline industry has been described as a contestable market; does the example of Vanguard support or refute this characterization of the airline industry? Explain.

Answer 1

Answer: Yes it supports the characterizations of the airline industry

Step-by-step explanation:

Market Place: in economics system is where a group of companies meet to compete with each other in order to sell their products and services . It usually made up of buyers and sellers who communicate with each other for an exchange.

Contestable market: a contestable market is a market characterized by companies who can enter and leave freely whenever they dim fit with a low sunk costs. What this means is even in a market where either of monopoly or oligopoly is present, companies who dominate such market would always act competitively when there are no barriers for competitors.

From the example above, which supports the characterization of the airline industry as being contestable market Vanguard entered the market freely and also left when they couldn’t keep up with the competitiveness of delta.

Answer 2

Air Company itself might be a key business on the earth wherever during this time and age it ought to be protracted to require maintenance of its request growth of airlines business want immense asset which might be supported from business bank and stockholders but these stockholders need safety for his or her outcome on speculation.

In the higher than case the airline profession appears to be increasing its revenue over the varied nations there by enormous money demand is required but an airline business in today's market is of giant request and therefore my opinion is against the given case wherever the business is shown insolvent. Within the higher than case there is also the unsuitable preservation of books and commutation gap that lead it to the insolvency