Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive...
GMAT Critical Reasoning : (CR) Questions
Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.
Which of the following, if true, most seriously weakens the argument?
Passage Analysis:
| Text from Passage | Analysis |
| Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. |
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| However, this method of eliminating competition cannot be profitable in the long run. |
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| Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares. |
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Argument Flow:
The argument starts by describing a predatory pricing strategy, then immediately argues against its effectiveness. It supports this position by explaining the logical problem: any attempt to recover losses through higher prices creates an opening for new competition.
Main Conclusion:
Predatory pricing by airlines cannot be profitable in the long run.
Logical Structure:
The author uses a cause-and-effect chain to show why the strategy fails. The premise is that raising prices to recover losses attracts new competitors, which directly supports the conclusion that the overall strategy can't work long-term.
Prethinking:
Question type:
Weaken - We need to find information that reduces our belief in the conclusion that predatory pricing cannot be profitable in the long run
Precision of Claims
The argument makes a universal claim about profitability over time - it says this strategy 'cannot be profitable in the long run' because competitors will always return when prices go back up
Strategy
To weaken this argument, we need to find scenarios where the predatory pricing strategy could actually be profitable long-term, despite the author's reasoning. We should look for ways that airlines could successfully recoup their losses without attracting new competitors, or situations where the basic cycle described by the author gets disrupted
This choice discusses the legality of predatory pricing in some countries. However, whether the practice is legal or illegal doesn't address the economic argument about long-term profitability. The argument isn't claiming predatory pricing is wrong because it's illegal - it's arguing it's ineffective because competitors will return when prices rise. Legal status has no bearing on the economic cycle described.
This significantly weakens the argument. The argument assumes that when airlines raise prices to recover losses, new competitors will enter to undercut them. But if potential competitors believe the original airline will engage in predatory pricing again, they'll be deterred from entering the market. This fear factor breaks the cycle the argument describes - competitors won't rush in when prices go up because they expect another price war. This could allow airlines to successfully recoup losses without facing new competition.
This discusses promotional pricing to attract customers, which is different from the strategic predatory pricing described in the argument. Promotional pricing is typically short-term and customer-focused, while predatory pricing specifically aims to eliminate competitors. This doesn't address whether the competitor-elimination strategy can be profitable long-term.
This talks about what airlines do with resources when they stop serving routes, but doesn't relate to the profitability of predatory pricing strategies. The argument is about whether airlines can make money by using low prices to drive out competitors, not about resource allocation after abandoning routes.
This mentions that low fares increase total passenger volume, which could potentially help offset losses through higher volume. However, the argument specifically states that airlines price 'at which they lose money,' implying that even with increased volume, they're still losing money per passenger. This doesn't address the core issue of what happens when they try to raise prices later.