Question

An article in Forbes described these characteristics of the airline​ industry: ​"Airlines aren't like normal consumer businesses... Infrastructure including​ aircraft, gates and runways takes years to put in place. Capacity rebalancing in response to demand shifts​ isn't easy and idle infrastructure of this magnitude is very​ expensive." ​Source: Kevin​ O'Marah, "The Lesson of the Delta​ Disaster: Flying Is Too​ Cheap," Forbes​, August​ 11, 2016. Do the characteristics referred to in the article help to explain why the airline industry is an​ oligopoly? Briefly explain.

Answer 1

Yes, the characteristics help to explain why the airline industry is an oligopoly.

Step-by-step explanation:

An oligopoly is a type of market which is comprised of a small group of firms whose services are expensive. One of the major characteristics of Oligopolies is the high entry cost of new businesses in the industry. The infrastructural, financial, and legal requirements required of new firms in this industry are so daunting that most people get discouraged from venturing into such businesses. This is the attribute described in this Forbes article. The infrastructure and logistics involved in becoming a part of the airline industry is quite expensive.

Other characteristics of oligopolies include the fact that these small group of firms take each other into consideration before setting prices or making other significant changes. They also have non-price competition. which is competition on the basis of factors other than price.