Write the pay-off matrix of this static game

Assignment Help Business Economics
Reference no: EM131246152

Consider the following static airline game. Two airlines, Delta and American Airlines, compete setting prices for the route Columbus-Chicago on Tuesdays at 7:20PM. There are 60 potential passengers with a reservation price of $500 and 120 additional passengers with a reservation price of $220. Assume that price discrimination is not possible (perhaps for regulatory reasons or because the airlines don’t know the passenger types). The costs are $200 per passenger. Assume that airlines must choose between a price of $500 and a price of $220. Assume that if equal prices are charged, the passengers are evenly shared but that the low-price airline gets all the passengers otherwise.

a. Write the pay-off matrix of this static game.

b. Find the two Nash Equilibrium(s) using the pay-off matrix in part a. Are these equilibrium in dominant strategies? Why is “both airlines charging a low price” an equilibrium?

c. Provide an intuitive explanation on which equilibrium you might expect to see? What might cause both airlines to price low?

Reference no: EM131246152

Questions Cloud

Pitfalls of kind of segmentation : What are some of the pitfalls of this kind of segmentation? Do you think these ads will be successful in the long run?  Why or why not? Should marketers be concerned about offending one market segment when trying to reach another?
The terms of the loan : Joshua would like to purchase a car with a cost of $22,000. He is able to finance the entire cost of the car with a loan. The terms of the loan are 60 monthly payments at an interest rate of 5.9% per year, compounded monthly. How much will his monthl..
Required in developing an advertising program : What steps are required in developing an advertising program? In addition, how should sales promotion decisions be made? Discuss the guidelines for effective brand-building events and experiences.
Closely conform with the gravity model of trade : Identify a country that could be considered an outlier to the predictions of the Gravity Model of international trade. Give explanations for why the country does not closely conform with the Gravity Model of Trade.
Write the pay-off matrix of this static game : Consider the following static airline game. Two airlines, Delta and American Airlines, compete setting prices for the route Columbus-Chicago on Tuesdays at 7:20PM. There are 60 potential passengers with a reservation price of $500 and 120 additional ..
Applied negotiating skills : Chapter 6 of Foundation of Supply Management textbook lists 22 characteristics of a supply management professional that are helpful when negotiating.
Saving the whales : Saving the whales: Can the approach Hank Fischer used with wolves be applied to other animals like whales? Be sure to explain your conclusion well.
Calculate the mean median and standard deviation : Calculate the mean, median, and standard deviation of age and %fat.
Socio-cultural environment of target country : One of the reasons for expatriate failure is the inability of the expatriate to adjust to the socio-cultural environment of target country of deployment. As an International human resource manager,

Reviews

Write a Review

 

Business Economics Questions & Answers

  What is the estimated cost of construction

A Petroleum company recently completed construction on a large refinery in Louisiana. The final construction cost was $71,000,000. The refinery covers a total of 260 acres. If the power-sizing exponent for this type of facility is .70, what is the es..

  Illustrate what about italian labor-force participation rate

Illustrate what about Italian labor-force participation rate and unemployment rate.

  Income tax return-what is economic profit

Suppose an assistant professor of economics is earning a salary of $75,000 per year. One day she quits her job, sells $100,000 worth of bonds that had been earning 5 percent per year, and uses the funds to open a bookstore. At the end of the year, sh..

  Estimate the per item selling price of new line of clothing

You have been asked to estimate the per item selling price of a new line of clothing. Use the estimated time complete item number 50 as your standard time for the purpose estimating the selling price per item( rounded to the nearest cent).

  Debating connections between business-law and politics

Discuss the ethics of the situation where a lifetime warranty is defined as based on the “life of the product.” Analyze and evaluate the various issues presented while arguing and debating the connections between business, law, politics, and ethics.

  Study of intertemporal utility maximization

In our study of intertemporal utility maximization, everything (initial and ending wealth, interest rate, and consumption) in the budget constraint is expressed in real terms. Reformulate the budget constraint in nominal terms and show that for a two..

  Units of each component should be ordered from each supplier

Edwards Manufacturing Company purchases two component parts from three different suppliers. The suppliers have limited capacity, and no one supplier can meet all the company’s needs. In addition, the suppliers charge different prices for the componen..

  Agricultural experiment examined response of corn production

An agricultural experiment examined the response of corn production (output C) to variations in two inputs pounds of nitrogen fertilizer per acre (N) and the number of corn plants planted per acre (P). Thus, the production function is on the form C =..

  Explain how does your graph relate to the other two graphs

Explain how does your graph relate to the other two graphs. What do any of these graphs have to do with price discrimination.

  Consumer is unable to distinguish between two firms products

A risk-neutral consumer is deciding whether to purchase a homogeneous product from one of two firms. One firm produces an unreliable product and the other a reliable product. At the time of the sale, the consumer is unable to distinguish between the ..

  Remember to indicate tax revenue-deadweight loss

The US imports car tires from China. In 2009, the administration imposed a 35% tariff on imported tires. Draw a supply-demand diagram depicting the impact of a $35 tariff on a $100 tire. Remember to indicate tax revenue, deadweight loss, and consumer..

  What would be the best choice for the max corporation

Max Corporation has $10,000 in retained earnings that it has not distributed to its stockholders as dividends. It has a choice to invest the funds in a certificate of deposit at a bank at a guaranteed rate of 7 percent, or to plow back the funds in t..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd