Two airplane manufacturers are considering the production of a new jet. Both are deciding whether to enter the market and produce the new planes. Market demand is large enough to support only one manufacturer and the payoff matrix is as follows. Both Airbus and Boeing can get perfect information on the profits of their competitor. Airbus Don't produce Airbus gets zero profit Produce Airbus loses $5M| Produce Boeing loses $5M Boeing gets $100M profit Вoeing Airbus gets $100M profit Airbus gets zero profit Don't produce Boeing gets zero profit Boeing gets zero profit Al. Use the information from the matrix to select the best strategy for Airbus and Boeing. Boeing Produce, Airbus Produce (one dominant strategy) Boeing Produce, Airbus Don't Produce (one dominant strategy) Boeing Don't Produce, Airbus Produce (one dominant strategy) Boeing Don't Produce, Airbus Don't Produce (one dominant strategy) There isn't one dominant strategy A2. Identify any Nash equilibria. There are no Nash equilibria One NA: Boeing Produce, Airbus Produce One NA: Boeing Produce, Airbus Don't Produce One NA: Boeing Don't Produce, Airbus Produce One NA: Boeing Don't Produce, Airbus Don't Produce Two NA: Boeing Produce, Airbus Produce AND Boeing Don't Produce, Airbus Don't Produce Two NA: Boeing Produce, Airbus Don’t Produce AND Boeing Don't Produce, Airbus Produce * O0000o 2 000O00 O
Two airplane manufacturers are considering the production of a new jet. Both are deciding whether to enter the market and produce the new planes. Market demand is large enough to support only one manufacturer and the payoff matrix is as follows. Both Airbus and Boeing can get perfect information on the profits of their competitor. Airbus Don't produce Airbus gets zero profit Produce Airbus loses $5M| Produce Boeing loses $5M Boeing gets $100M profit Вoeing Airbus gets $100M profit Airbus gets zero profit Don't produce Boeing gets zero profit Boeing gets zero profit Al. Use the information from the matrix to select the best strategy for Airbus and Boeing. Boeing Produce, Airbus Produce (one dominant strategy) Boeing Produce, Airbus Don't Produce (one dominant strategy) Boeing Don't Produce, Airbus Produce (one dominant strategy) Boeing Don't Produce, Airbus Don't Produce (one dominant strategy) There isn't one dominant strategy A2. Identify any Nash equilibria. There are no Nash equilibria One NA: Boeing Produce, Airbus Produce One NA: Boeing Produce, Airbus Don't Produce One NA: Boeing Don't Produce, Airbus Produce One NA: Boeing Don't Produce, Airbus Don't Produce Two NA: Boeing Produce, Airbus Produce AND Boeing Don't Produce, Airbus Don't Produce Two NA: Boeing Produce, Airbus Don’t Produce AND Boeing Don't Produce, Airbus Produce * O0000o 2 000O00 O
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Two airplane manufacturers are considering the production of a new jet. Both are deciding
whether to enter the market and produce the new planes. Market demand is large enough to
support only one manufacturer and the payoff matrix is as follows. Both Airbus and Boeing can
get perfect information on the profits of their competitor.
Airbus
Don't produce
Airbus gets zero profit
Produce
Airbus loses $5M|
Produce
Boeing loses $5M
Boeing gets $100M profit
Вoeing
Airbus gets $100M profit
Airbus gets zero profit
Don't
produce
Boeing gets zero profit
Boeing gets zero profit
A1.
Use the information from the matrix to select the best strategy for Airbus and Boeing.
Boeing Produce, Airbus Produce (one dominant strategy)
Boeing Produce, Airbus Don’t Produce (one dominant strategy)
Boeing Don't Produce, Airbus Produce (one dominant strategy)
Boeing Don't Produce, Airbus Don't Produce (one dominant strategy)
There isn't one dominant strategy
A2.
Identify any Nash equilibria.
There are no Nash equilibria
One NA: Boeing Produce, Airbus Produce
One NA: Boeing Produce, Airbus Don't Produce
One NA: Boeing Don't Produce, Airbus Produce
One NA: Boeing Don't Produce, Airbus Don’t Produce
Two NA: Boeing Produce, Airbus Produce AND
Boeing Don't Produce, Airbus Don't Produce
Two NA: Boeing Produce, Airbus Don’t Produce AND
Boeing Don't Produce, Airbus Produce
Z O000 0 000000
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