As a result of the restrictions on travel, the Airline Industry is in financial distress.
Use the data below to answer questions
Firm % of Market
American 17.6%
Delta 17.5%
Southwest 16.9%
United 14.9%
Alaskan 6.4%
JetBlue 5.5%
Spirit 4.2%
Frontier 3.1%
SkyWest 2.9%
Hawaiian 1.6%
- Explain why this industry is considered an oligopoly using the characteristics of the industry, the 4-firm
concentration ratio and the current Herfindahl-Hirshman Index.
Extra Credit: What if (hypothetically) United needed to merge with another airline in order to stay in
business. Would the government be more likely to approve a merger with SouthWest or with Spirit? Use
the post merger HHI's to justify your answer.
Sample Solution