Suppose only two airlines fly between London and New York. There are 100 flights between the two cities on a daily basis, of which 90 flights are operated by London Airways and the remaining 10 by United New York. The average market price of a one-way ticket between London and New York is £500, and both airlines have marginal costs of £300.

On average, a flight carries 250 passengers. What are the incentives for the two airlines to lower ticket prices as a way of trying to get travelers to switch to the firm from which they are not currently purchasing? Which airline is more likely to lower its ticket price?