Question
Let's consider the hotly debated case of Spirit v. Northwest. New evidence, that was not available at the time of the trial, has just come
Let's consider the hotly debated case of Spirit v. Northwest. New evidence, that was not available at the time of the trial, has just come in and you have been hired to analyze whether Spirit's claim of predatory pricing by Northwest is now either stronger or weaker. Specifically, there are two econometric estimates regarding the price that Northwest would have charged in the DetroitPhiladelphia route after Spirit shut down its operations, had Spirit never entered that market. One estimate suggests that this but-for price should have been $220 for a one-way ticket, whereas the other estimate suggests that this but-for price should have been $200 for a one-way ticket. The actual price that Northwest charged after Spirit's exit was $210. If you were hired by Spirit to present a stronger case:
a. Which estimate of the but-for price would you choose and why? (5 points)
b. Given your response, what would be the corresponding "overcharge" per ticket in this "post-Spirit" period? Assuming that 1,500,000 tickets were sold in this period, how much would the treble damages amount to during this period for which you have data? Please explain your calculations. (5 points)
c. Finally, assuming that the econometric technique and model used to compute the but for price (that you have chosen for your calculations) are accurate and uncontested, why would your calculation in b. provide understatement of the actual total damages? (5 points)
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