UltrAir is a new airline headquartered in Atlanta. The other airlines holding a leading share in the Atlanta market are Delta and Southwest. However, UltraAir's cross-price elasticity with Southwest is zero. UltrAir's target market is "full fare" business travelers, and its competitive strategy is to attract these travelers by offering better service than its competitors for the same price. UltrAir offers wider seats, more leg room, and better food in its coach section than other airlines. It also offers convenient flight times for business travelers and "frequent flyer" mileage in American Airlines' program. Despite this overall superior service, UltrAir follows a pricing policy of setting its fares exactly equal to Delta Airlines' "full fare" (which coincidently is the same as Southwest's full fare). The difference is that UltrAir does not offer any discount fares; it wants only "full fare" passengers. At present, UltrAir flies only one route, between Atlanta and San Francisco. Delta's "full fare" coach price for this route is $1,000 (round trip) and UltrAir's price is the same. At that price, there are about 300 "full fare" passengers per day on this route, and 150 of these passengers fly on Delta. UltrAir needs revenues of $135,000 per day to break even. The company's goal is to win 60% market share, or 180 passengers per day. UltrAir has been flying for about two months, and so far is drawing fewer than 30 passengers per day, but the company's managers are confident that their business will grow.

iii) At current fares, assuming 250 business days per vear, and an overall price elasticity in the market of 2, by how much will Delta's and UltrAir's market share and revenue change if Southwest raises its fare by 1097 Explain your answer in detail. 10 Pts. Assuming 250 business days per year, and a price elasticity of zero, how much market share and revenue will Delta lose if it cuts its fare by $507 Explain your answer in detail by describing the concept of indifference zones and under what condition(s) you would expect price elasticity to be zero. 20 Pis. Assuming 250 business days per year, and a price elasticity of zero, what will be UltrAir's break-even market share if they drop their fare by $1007 10 Pis