The application "Deadweight Losses in the Food and Tobacco Industries" shows that the deadweight loss as a fraction of sales varies substantially across industries. One possible explanation is that the number of firms (degree of competition) varies across industries. Using Table 14.2 and other information from the chapter, show how the deadweight loss varies in the airline market as the number of firms increases from one to three.
Table 14.2: Nash-Cournot Equilibrium Varies with the Number of Firms