Economics (Micro And Macro) - Essay Example

The BA’s main reason for participating in this alliance is the possibility to reduce the ticket prices on air transportation due to the bigger amount of profit. Despite the fact that anti-monopolistic committee allowed the partnership, the airline company Virgin Atlantic sets protests against it. The merge of two big companies will make them monopolists in their service sphere. As mentioned above the bigger profit allows the owners to provide better services, to have upgraded planes, to set lower prices on the tickets and what is even more important – to provide the better level of security.

The company with average profits will be driven off the market. To fight this injustice they even applied the anti-advertising technique by putting the following message on their airplanes “No way to BA/AA. The headquarter of a new alliance will be located in London since the controlling interest belongs to BA. Analyzing this article it is necessary to point out several issues that are to be considered in details. The first notion is monopoly since the new alliance represents the monopolistic leader in Europe.

Though at the same time considering the whole world where BA+AA will have the third place in volume of passengers transportation, it is necessary to point out that in the scale of the world competition we can observe the monopolistic competition. The second notion that is to be analyzed is merge and strategic alliance in order to identify the type that BA and AA has. In books on economics one can find the following definition of monopoly as: “If a certain firm is the only one that can produce a certain good, it has a monopoly in the market for that good (Samuelson & Marks, 2003).

When studying monopoly in theory it is usually accepted that only one company operates in its industry - it produces and sells the whole volume of products. Though, in life monopoly is represented by a big company that controls the biggest part of