In the 1980s, typical round-trip coach airfares from the East Coast to London were more than $500. Then Freddie Laker introduced the People's Express, a competing service into Newark at $350. Major airlines matched his price-and continued to do so until they drove People's Express out of business. Then prices shot back up to over $500. A lawsuit filed under the Sherman Act resulted in the judgment that the major airlines had explicitly tried to destroy a competitor. The experience of People's Express is an example of ________ on the part of the major airlines.

A) price fixing
B) price discrimination
C) deceptive pricing
D) predatory pricing
E) pricing constraints

Question

Diego Hernandez · Accepted Answer

Final Answer : D, Explanation :  The major airlines engaged in predatory pricing by lowering their prices to match People's Express with the intent to drive them out of business, and then raising prices again once the competitor was eliminated.

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