The International Air Transport Association (IATA) has been composed of 108 U.S. and Europe an airlines that fly transatlantic routes. For many years, IATA acted as a cartel: It fixed and enforced uniform prices.
a. If IATA wanted to maximize the total profit of all member airlines, what uniform price would it charge?
b. How would the total amount of traffic be allocated among the member airlines?
c. Would IATA set price equal to marginal cost? Why or why not?