United Airlines Oligopoly

The most recent video about United Airlines “re-accommodation” goes viral. The video creates a trend to boycott the airline. Lucky if you are the rival of United Airlines, the fact is that there is very few of you. United is the only player in many airline markets. Even though a consumer deleted the app, the person has no other choice if only United provide the route he wants. By Statistic Brain, United takes 16% of market shares in Airline Domestic Market. In such situation, what would make true threaten to United Airlines, as a single consumer?

As an important structure of the market, United Airlines is one of the Oligopoly. By Pindyck and Rubinfeld, “oligopoly refers to the few player in a market, and they conduct imperfect competition in the market.” In such situation, if one oligopoly decreases product price, all other oligopolies would follow, so they would not lose all market share. If one oligopoly increases product price, other would not follow and the one increase price would lose market share. Therefore, all oligopolies would not adopt price competition, instead, they would keep the price at a relatively similar level. Non-price competition takes place, and they would differentiate the product, provide more service with higher return rate, and provide deals to

For those switch cost is low and totally price oriented consumer, oligopolies only able to capture the consumer by price setting, means less profit for the company. Just like economy class passengers that chasing cheap flights in Airline industry. Another type is the loyal consumers, purchase additional services and not only driven by price. In such case, high-end passenger is such kind of consumers. Specifically, this type consumer includes the frequent passengers, business class passengers and first-class passengers. The marginal return of those passengers is high, and the non-price competition works