Emirates and other Middle East carriers have expanded aggressively into the "kangaroo" route between Britain and Australia, In 2013.Qantas and Emiratesagreed to coordinate schedules, advertising, and pricing, and share revenues Qantas changed its kangaroo stopover from Singapore to Dubai.Subsequently, Virgin Atlantic withdrew from the kangaroo market.(Source: "Qantas-Emirates alliance receives full (draft) approval from Australia's competition authority," Centre for Aviation.December 20, 2012.)

(a) Suppose that airlines set capacity according to the Cournot model.If Emirates and Qantas reduce their marginal cost through the code-share agreement, how should other airlines adiust their capacity?

(b) Suppose that Emirates-Qantas exercises capacity leadership.How would other airlines adjust their capacity as compared with (a)?

(c) How will the agreement between Qantas and Emirates to share revenues affect their incentive to cut price?

(d) If Qantas and Emirates raise prices, how should other airlines respond?