Economics

An industry is described as (Industry, 2013) a department or branch of a craft, art, business, or manufacture; especially: one that employs a large personnel and capital especially in manufacturing a particular good; for instance the new energy drinks Redbull and Monster both produce a fruit flavored drink that includes stimulants and caffeine and are therefore situated within the beverage industry but more precisely the carbonated soft drink industry.

Inside an industry, there are market structures, an article entitled, “Price Takers and Price Makers – Pricing Power” (Riley) essentially describes the characteristics of a market ,they include the size of the firm, number of firms operating in the market, power and degree of barrier to enter and exit, merchandise variety and whether firms are price makers or price takers.

Based on the above characteristics, we are able to classify and group industries into one of the following market structures such as perfect competition, monopoly, oligopoly, monopolistic competition, duopoly and natural monopoly.

My focus will be on the airline industry, specifically the commercial airline industry. It will identify the market structure which airlines function within an oligopoly. According the examples mentioned in, Economicae: an Illustrated Encyclopedia of Economics (Byrns ) this relates to the suggestion that only a small amount of commercial airline’s have a large amount of total output in the market that’s determined by the concentration ratio, which is a measurement of competitive behavior.

In the diagram below from the Bureau of Transportation Statistics (RITA), it can easily be seen the five largest companies who have the leading share within the airline market; these include: US Airways, Southwest airlines, united airlines, and Delta airlines. The top five airline association s mentioned altogether account for 62% of every sale in the airline industry; whereas the other listed associations make up the...