Homework 2

Homework 2 - 1.a. American Airlines value pricing strategy...

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1.a. American Airline’s value pricing strategy set a new system of ticket fares that did not follow the traditional four tier pricing strategy. For instance while their competitors set new prices to accommodate the upcoming travel season, rather than matching their competitor’s prices, American Airlines cut all their ticket prices in half. Although this generated large consumer demand, the company suffered heavy losses as the price cuts did not compensate the immense loss in total revenue. http://articles.latimes.com/1992-10-01/business/fi-496_1_american- airlines b. AA believed that the significant increase of consumer demand would offset any loss caused by the reducing the ticket price. The strategy relied on attracting the competition’s consumers to generate more revenue. c. AA discontinued value pricing because the discount prices did not always account for the fixed cost for a flight. Therefore, the low prices and high ticket sales actually hurt the company’s earnings. d. I would not have recommended value pricing because it
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Homework 2 - 1.a. American Airlines value pricing strategy...

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