Yesterday, while under the gun to finish some edits and a referee report, I listened to BBC Radio 4. One memorable interview was with a union organizer discussing the recent BA sympathy strike with the fired workers from caterer Gate Gourmet.
One of the contentions in this situation is that in the market for caterers large enough to serve BA at Heathrow, it’s a duopoly: Gate Gourmet and Sky Chefs. Here’s what I don’t understand: why don’t they hire multiple caterers? If the pricing/reliability benefits outweigh the economies of scale, they should be willing to hire different caterers. They can have them specialize in different terminals, or hire one caterer to do meals for flights to Asia, one for Middle East, one for Europe and US, etc.
Then, even if you are still facing a duopoly, at least you contract with both of them and you increase your probability of getting a Bertrand outcome.
Either I’m missing something, or they’re not thinking very strategically. Which is it?