CR: Some airlines allegedly reduce fares...

[Guest]

Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.

Which of the following, if true, most seriously weakens the argument?

a. in some countries it is not illegal for a company to drive away competitors by selling a product below cost
b. airline execs generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge
c. as part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.
d. on deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
e. when airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.

i know that a, c are out, but i don't know how to whittle it down more.

[RonPurewal]

the argument rests on the premise that, once the leading airline raises its prices back up to 'normal' higher levels, other airlines will jump right back into the fray.

therefore, choice b is correct: it states that other airlines are likely to continue to stay away, even after the big mean price-cutting airline raises its prices back up. (if their executives believe that 'big air' will simply lower its prices again if they try to wedge back into the market, then they'll stay out.)

choice d is irrelevant, because the pasasge and its conclusion aren't at all affected by what the other airlines do if they decide to stop serving some particular route. all that matters is that they decide to stop serving the route; the subsequet decisions are immaterial.

choice e is also irrelevant, as the argument doesn't turn on what happens during the low-fare period (its most important premises concern what happens after prices are raised back)

[vivs.gupta]

Ron,

I found this CR very tough and infact could not mark any options.
Option B merely says that executive beleive.....

Can we take somebodies beleive as a fact or as a statement? Somehow I rejected this option as soon as I read it.

[johnsonjz26]

Conclusion: Dumping is not profitable
In order to undermine the conclusion we should prove that it is profitable

A strengthen because it stated that the practice is not legal
B strengthen the premise that new competitors will do so
C irrelevant
D correct. it indicates that high fare price is not the only way to recoup the losses, profits from other airlines could recoup losses
E irrelevant, we don't know whether such thing will happen to others who also reduce the price

[jlucero]

Conclusion: Dumping is not profitable
In order to undermine the conclusion we should prove that it is profitable

A strengthen because it stated that the practice is not legal
B strengthen the premise that new competitors will do so
C irrelevant
D correct. it indicates that high fare price is not the only way to recoup the losses, profits from other airlines could recoup losses
E irrelevant, we don't know whether such thing will happen to others who also reduce the price

The correct answer here is (B). See Ron's post above.

[jlucero]

Ron,

I found this CR very tough and infact could not mark any options.
Option B merely says that executive beleive.....

Can we take somebodies beleive as a fact or as a statement? Somehow I rejected this option as soon as I read it.

Take a look at Ron's stated assumption:

once the leading airline raises its prices back up to 'normal' higher levels, other airlines will jump right back into the fray.

Beliefs are irrelevant when we're looking at something outside of their immediate control or outside the scope of discussion: I am good at Math because I believe I am (or I believe everyone should recycle).

But not when it might affect someone's course of action: I believe the stock price of company X might go up, so I might choose to purchase something.

If "airline execs generally believe that a company is very likely to (raise prices on routes)", then they probably would be less likely to undercut the airline's fares.

[JsamineS876]

the argument rests on the premise that, once the leading airline raises its prices back up to 'normal' higher levels, other airlines will jump right back into the fray.

therefore, choice b is correct: it states that other airlines are likely to continue to stay away, even after the big mean price-cutting airline raises its prices back up. (if their executives believe that 'big air' will simply lower its prices again if they try to wedge back into the market, then they'll stay out.)

choice d is irrelevant, because the pasasge and its conclusion aren't at all affected by what the other airlines do if they decide to stop serving some particular route. all that matters is that they decide to stop serving the route; the subsequet decisions are immaterial.

choice e is also irrelevant, as the argument doesn't turn on what happens during the low-fare period (its most important premises concern what happens after prices are raised back)

Sorry, Ron, I still can't understand why E is wrong.
In the choice E, it briefly says---when fares are reduced, the number of passengers will increase.
And the total profits=fares*tickets sold.
If fare reduces and the number of tickets sold increases, the total profits will increase, which weakens the argument.

[gmatkiller_24]

I have been quite struggled in this question.

I initially picked E, but after seeing this post, here are some of my thoughts, correct me if I am wrong.

every time I make a mistake in CR,though rarely, is because I do not carefully figure out what is premise and what is conclusion, thus letting outside knowledge affect my judgement.

recoup the losses cannot work out caused many competitors will come back to undercut the fare → long-term not profitable

choice E has nothing to do with it, and it specially address a typical period of decreased fare, not the long-term profitability.

[RonPurewal]

I initially picked E, but after seeing this post, here are some of my thoughts, correct me if I am wrong.

every time I make a mistake in CR,though rarely, is because I do not carefully figure out what is premise and what is conclusion

if you are actually thinking about the green things while solving the problem--in other words, if you're explicitly trying to stick labels ("premise", "conclusion") on the statements as you read--then THAT is the problem.

the ONLY purpose of labels such as "premise" and "conclusion" is to enable us to discuss how arguments work. you should NOT "label" the sentences as you read an argument.

see, to understand these arguments, we have to comprehend them as everyday real-life arguments--the same kinds of arguments you and i and everyone else make every day.

You can't park there. That's a handicapped spot.
--> it's pretty obvious that "you can't park there" is the conclusion.

Sure, if you only eat 500 calories a day, you'll lose a bunch of weight at first. But you won't keep the weight off that way. Your metabolism will slow down, and eventually you'll start to gain back the weight.
(this one has exactly the same logical structure as the gmat problem in this thread)
--> i bet you don't have any trouble recognizing that "you won't keep the weight off" is the main point.

now go back and read those real-life arguments again--this time trying to stick labels on the sentences.
you'll find that your job is suddenly a lot harder. now you know why--we don't "stick labels" on sentences in ordinary conversation, so, by doing so, you are moving away from comprehending the arguments in real-world terms.

[RonPurewal]

so, YOUR job, as you read, is to transform the words into a real-life understanding.

sometimes, you can directly personalize a situation. e.g., if an argument says So, Product X will sell well, you can cast yourself as a potential buyer of that product (since buyers, not sellers, ultimately determine what sells well and what doesn't).

in other cases--like this one--you can't directly personalize the situation, for any of various reasons.
here, we can't directly personalize because the argument is about aggregate profit, not about whether people will or won't do something. you could cast yourself as someone who wants to buy an airline ticket, but that will help only in a trivial sense ("okay, i'll buy the lowest-priced ticket).
in these cases, try to imagine an actual conversation in which someone is delivering the message.

• if your first language is a language other than english, that's an advantage here: you can translate the words into that language. since you're forced to change the words, you'll be more likely to translate into something resembling a normal conversation.

• if your first language is english (or if you prefer to keep thinking in english), try to transform the sentences into conversational language in your mind.

[RonPurewal]

e.g., here's the argument from the problem, the way someone might actually SAY it:
OK, so I heard that Ryanair has made tickets so cheap that they're actually losing money. Basically, the idea is that everyone will want the cheap tickets, and so the other airlines won't get any customers. But, dude, they won't make any money that way. Eventually, their prices will have to shoot up even higher than normal, so that those original losses don't make them bankrupt. And once they do that, the other airlines will just jump in and steal their business.

note several hallmarks of ordinary conversation here: "they" for ryanair; "dude"; "ok"; a sentence starting with "and".
all of these would be wrong in formal writing--of the kind tested in SC--but that's exactly the point, since formal writing does not at all resemble ordinary speech.

if you can "hear" an imaginary person SAYING the things above, i bet you know--immediately--that his/her main point is "they won't make money that way."

more importantly, you understand exactly why the speaker says everything, without sticking labels on the sentences.
... and that understanding (which is subconscious) is MUCH more specific than any label, so, if you were to stick labels on the sentences, you would be actively doing yourself a disservice--you'd be taking yourself from a better understanding to a worse understanding.

[gmatkiller_24]

got it!

Thanks

[RonPurewal]

you're welcome.

[evelynho]

Hello instructors,
I have read these threads again and again and used all my real world intuition and common sense to understand why the OA B is right and why E is irrelevant or wrong, though, I was still confused deeply.

I can comprehend that this prompt is trying to persuade me to believe that this method of reducing fares to drive way competitors can not be profitable in the long run, but somehow as soon as I read to B, I will eliminate it on the grounds that a company doing this strategy again may suffer further losses, that's kind of support for the argument.

Regards to E, given that the total number of air passengers increases, airline can be profitable because of increased sales, that's kind of weaking to the argument.

Please shed light on my thinking way.
Thank you in advance.
EH

[RonPurewal]

we're talking ONLY about situations in which "airlines successfully implement this method" -- in other words, the method of reducing fares UNTIL THE AIRLINE IS LOSING MONEY.

so... even if choice E is true, the airline is still losing money despite the increase in passengers.