Reference no: EM1317201

a) Suppose both governments offer their respective company a subsidy of $4(million), but only if they produce.  Airbus is still able to produce before Boeing.  Fill in the new payoff matrix below.  What is the equilibrium outcome?

b) Suppose both governments offer their respective company a $10 million subsidy, but only if they produce.  Fill in the new payoff matrix below.  What is the equilibrium outcome? (assume this is a simultaneous move game and add the subsidy to the original payoff matrix given at the start of this problem.)

c) Suppose the U.S. government (but not Europe) offers a $10 million subsidy but only if Boeing produces.  Fill in the new payoff matrix below.  What is the equilibrium outcome? (assume this is a simultaneous move game and add the subsidy to the original payoff matrix given at the start of this problem.)

d) How could the U.S. government justify its decision to offer a subsidy to an already profitable and successful business? (Hint: is there any positive economic payoff for the government here?)