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Chapter 11: Q. 3 (page 271)

Some years ago, two intercity bus companies, Greyhound Lines, Inc. and Trailways Transportation System, wanted to merge. One possible definition of the market in this case was 鈥渢he market for intercity bus service.鈥� Another possible definition was 鈥渢he market for intercity transportation, including personal cars, car rentals, passenger trains, and commuter air flights.鈥� Which definition do you think the bus companies preferred, and why?

Short Answer

Expert verified

The second definition, "the market for intercity transportation, including personal vehicles, car rentals, passenger trains, and commuter air flights," was favored by the companies.

Step by step solution

01

Definition

The antitrust law was created to protect consumers from unfair commercial activities. The regulations ensure market competition, preventing monopolies from forming and monopolists from charging excessively high prices. They make certain that a merging of companies will not be able to grab a large market share and so will not be exploited.

02

Explanation

Since two intercity bus firms sought to merge, they needed to make sure that the market definition did not reflect the merged businesses acquiring a substantial market share or being able to exploit customers. As a result, they favor the broad market definition because it suggests that they have a little market share, and the Justice Department is challenging the merger.

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