Discussion 9- economics-tactics for competitors Assignment

Discussion 9- economics-tactics for competitors - Assignment Example Large scale entry-deterrence is evident in the airline industry (McGuigan, Moyer, & Harris, 2008). Some entry-deterring strategies include capacity expansion, limiting prices and predatory pricing. Incumbents in the airline industry adjust their prices to neutralize the threat of entry in the airline bsiness. Adjusting prices limits contestability in the market. Incumbents can charge low prices before entry, charge low prices to push new firms out of business and shape expectations of new firms towards competition. Competition from southwest airlines and other firms results in the reduction of fares in the airline industry. The approach of limiting prices is to deter new firms from entering the market. Entry of firms such as southwest and people express forces incumbent firms to develop entry-deterring strategies in order to reduce competition. The incumbents decide whether to adjust prices or enter the business with large scale carriers. In order for new firms to successfully enter the market, they need to analyze entry conditions into the market before making their decisions. Before starting business new firms must understand the extent of entry barriers, consequences of ent ry barriers and develop counter measures to these