LimoZeenz and AirPorter and are the only two airport shuttle. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. The table above shows the payoff matrix for profits earned by each company based

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Problem 1QTC
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AirPorter (AP)
Don't
offer
Offer
Don't offer
AP earns
$8,000
LimoZeenz (LZ)
AP earns
$10,000
LZ earns
$16,000
LZ earns
$8,000
AP earns
$15,000
AP earns
$12,000
Offer
LZ earns
$12,000
LZ earns
$6,000
LimoZeenz and AirPorter and are the only two airport shuttle. Each firm must decide
on whether to offer its customers a mid-week discount for airport transportation.
The table above shows the payoff matrix for profits earned by each company based
on either offering or not offering the discount.
Refer to the table above, is there a dominant strategy for LimoZeenz and if so, what
is it?
Yes, LimoZeenz should offer the mid-week discount.
Yes, LimoZeenz' dominant strategy is to collude with AirPorter.
No, its outcome depends on what AirPorter does.
Yes, LimoZeenz should not offer the mid-week discount.
Transcribed Image Text:AirPorter (AP) Don't offer Offer Don't offer AP earns $8,000 LimoZeenz (LZ) AP earns $10,000 LZ earns $16,000 LZ earns $8,000 AP earns $15,000 AP earns $12,000 Offer LZ earns $12,000 LZ earns $6,000 LimoZeenz and AirPorter and are the only two airport shuttle. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. The table above shows the payoff matrix for profits earned by each company based on either offering or not offering the discount. Refer to the table above, is there a dominant strategy for LimoZeenz and if so, what is it? Yes, LimoZeenz should offer the mid-week discount. Yes, LimoZeenz' dominant strategy is to collude with AirPorter. No, its outcome depends on what AirPorter does. Yes, LimoZeenz should not offer the mid-week discount.
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