The Type of Rivalry: Southwest Airlines

Southwest Airlines begins a “bags fly free” campaign, charging no fees for the first and second checked bags.

Does this situation best represent producer-producer rivalry, consumer-consumer rivalry or consumer -producer rivalry? Explain.

The Type of Rivalry

Southwest Airlines has introduced a scheme according to which the first two bags (checked) of a particular size and weight will be accepted with and without a fare. It implies that the first two bags will fly for free if these bags do not exceed the weight of 50 lbs and the size of 62 inches. However, if the weights exceed the size of 62 inches and the weight of 50 lbs, the organization will charge $75 per-item (Southwest).

It seems to be a strategy that aims to increase or expand the consumer –base. We can identify this strategy as a producer-producer rivalry. It is because the strategy aims to target the consumer based on a rival organization. Most of the airlines charge a hefty fee on the bangs that customers carry. Some airlines do not consider the size and weight of the bags and charge fee on all types of bags no matter how small they are. In such a market, Southwest has introduced a very attractive offer that can increase the market share of the organization.

When competition is stiff, organizations introduce various kinds of offers to not only maintain the consumer based, but also to expand it. The airline industry is an oligopoly, in which discounts and offers can play a major role in increasing both revenue and profit. Therefore, the move by Southwest Airlines is extraordinary and it has the potential to produce desired results (increase the market share for the organization). It is also evident that this move will compel other organizations, of the Airline industry, to introduce similar offers to maintain the market-share and consumer-base. The producer-producer rivalry usually benefits consumers in the form of lower prices and improved services (Piccione).

Work Cited

Piccione, Michele. “Price competition under limited comparability.” The quarterly journal of economics 217.1 (2012): 97-135.

Southwest. “Checked Baggage.” Southwest, Southwest, 1 January 2018. Web. 7 September 2018. https://www.southwest.com/html/customer-service/baggage/checked-bags-pol.html.