Use this information to work Problems 5 and 6.
21 airlines fined in price-fixing scheme To date, 21 airlines have coughed up more than $1.7 billion in fines in one of the largest criminal antitrust investigations in U.S. history. To find a quick fix to avoid financial ruin, airlines came up with, according to federal prosecutors, a massive price-fixing scheme that artificially inflated international passenger and cargo fuel surcharges between 2000 and 2006. The scheme cost consumers hundreds of millions of dollars. The Justice Department called the case one of the largest antitrust settlements in U.S. history.
5. Explain how the price-fixing scheme benefited the airlines and imposed costs on consumers.
6. Describe the price-fixing scheme as the equilibrium outcome of an oligopoly cartel game played by the airlines. Explain why the cartel survived.