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Do pa and la have dominant strategies

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Reference no: EM13134452

Panther Airlines (PA) is the only airline that flies several routes. They have a potential competitor, Leopard Airlines (LA) who are considering entering these markets. PA maintains some excesscapacityas an entry deterrent and is eurrently earning $1 Om profit. PA signals that if LA enters these markets, theywill drop their prices. PA's profits will fall to $2m and LA will make a loss of $5m. If PA drops its prices and LA does not enter the markets, PA will earn $3m in profit. If PA were to accommodatethe new entranl, they would each earn $5m profit.

i. Draw up the payoffmatrix for this game.

ii. Do PA and LA have dominant strategies? Explain your answer.iii. What is the Nash equilibrium? Explain your answer.

Reference no: EM13134452

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