challenges to their profitability in the face of closed international borders. They are trying to find ways to cut routes that are less travelled and hope that they do not lose too much market share in the process. Both AeroUS and AeroCan are considering cutting their long-haul direct flights to Japan, or to Australia. No one airline has the ability to cut flights to both Japan and Australia. If AeroUS cuts flights to Japan and AeroCan cuts flights to Australia, AeroUS will lose 25% market share and AeroCan will lose 5% market share. If AeroCan cuts flights to Japan and AeroUS cuts flights to Australia, AeroUS will lose 5% market share and AeroCan will lose 25% market share. If both AeroUS and AeroCan cuts flights to Japan, AeroUS will lose 15% market share and AeroCan will lose 15% market share. If both AeroUS and AeroCan cuts flights to Australia, AeroUS will lose 3% market share and AeroCan will lose 3% market share. (i) Discuss whether this is a zero-sum game. (ii) Investigate whether there is any dominance in this game, and reduce the game by removing all dominated strategies. (iii) Hence, solve the game using game strategy. (iv) Discuss whether the solution in part (iii) above is an equilibrium point (v) Discuss whether there could be any other solution that may be better than the solution in part (ii) above for either, or both, of the airlines.
challenges to their profitability in the face of closed international borders. They are trying to find ways to cut routes that are less travelled and hope that they do not lose too much market share in the process. Both AeroUS and AeroCan are considering cutting their long-haul direct flights to Japan, or to Australia. No one airline has the ability to cut flights to both Japan and Australia. If AeroUS cuts flights to Japan and AeroCan cuts flights to Australia, AeroUS will lose 25% market share and AeroCan will lose 5% market share. If AeroCan cuts flights to Japan and AeroUS cuts flights to Australia, AeroUS will lose 5% market share and AeroCan will lose 25% market share. If both AeroUS and AeroCan cuts flights to Japan, AeroUS will lose 15% market share and AeroCan will lose 15% market share. If both AeroUS and AeroCan cuts flights to Australia, AeroUS will lose 3% market share and AeroCan will lose 3% market share. (i) Discuss whether this is a zero-sum game. (ii) Investigate whether there is any dominance in this game, and reduce the game by removing all dominated strategies. (iii) Hence, solve the game using game strategy. (iv) Discuss whether the solution in part (iii) above is an equilibrium point (v) Discuss whether there could be any other solution that may be better than the solution in part (ii) above for either, or both, of the airlines.
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Transcribed Image Text:(c) Two competing airlines, AeroUS and AeroCan, are operating in North America. They are both facing
challenges to their profitability in the face of closed international borders. They are trying to find ways
to cut routes that are less travelled and hope that they do not lose too much market share in the process.
Both AeroUS and AeroCan are considering cutting their long-haul direct flights to Japan, or to
Australia. No one airline has the ability to cut flights to both Japan and Australia.
If AeroUS cuts flights to Japan and AeroCan cuts flights to Australia, AeroUS will lose 25% market
share and AeroCan will lose 5% market share.
If AeroCan cuts flights to Japan and AeroUS cuts flights to Australia, AeroUS will lose 5% market share
and AeroCan will lose 25% market share.
If both AeroUS and AeroCan cuts flights to Japan, AeroUS will lose 15% market share and AeroCan
will lose 15% market share.
If both AeroUS and AeroCan cuts flights to Australia, AeroUS will lose 3% market share and AeroCan
will lose 3% market share.
(i)
Discuss whether this is a zero-sum game.
(ii)
Investigate whether there is any dominance in this game, and reduce the game by removing all
dominated strategies.
(iii)
Hence, solve the game using game strategy.
(iv)
Discuss whether the solution in part (iii) above is an equilibrium point
Discuss whether there could be any other solution that may be better than the solution in part (iii)
above for either, or both, of the airlines.
(v)
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