2.15 [Related to the Apply the Concept: “Are the Big Four Airlines Colluding?"] Airlines sometimes find themselves in price wars. Consider the following game: Delta and United are the only two airlines flying the route from Houston, Texas, to Omaha, Nebraska. Each firm has two strategies: Charge a high price or charge a low price. a. What (if any) is the dominant strategy for each firm? b. Is this game a prisoner's dilemma? Briefly explain. c. How could repeated playing of the game change the strategy each firm uses? United High Low United earns $20,000 United earns $30,000 High Delta earns $20,000 Delta earns -$10,000 Delta United earns United earns -$10,000 $0 Low Delta earns $30,000 Delta earns $0

2.15 [Related to the Apply the Concept: “Are the Big Four Airlines Colluding?"] Airlines sometimes find themselves in price wars. Consider the following game: Delta and United are the only two airlines flying the route from Houston, Texas, to Omaha, Nebraska. Each firm has two strategies: Charge a high price or charge a low price. a. What (if any) is the dominant strategy for each firm? b. Is this game a prisoner's dilemma? Briefly explain. c. How could repeated playing of the game change the strategy each firm uses? United High Low United earns $20,000 United earns $30,000 High Delta earns $20,000 Delta earns -$10,000 Delta United earns United earns -$10,000 $0 Low Delta earns $30,000 Delta earns $0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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