Two airplane manufacturers are considering the production of a new product, a 150-passenger jet. Both are deciding whether to enter the market and produce the new planes. The payoff matrix is as follows (payoff values are in millions of dollars): Airbus
Produce Don't Produce
Boeing Produce -5 for each 100 for Boeing, 0 for Airbus
Don't Produce 0 for Boeing,100 for Airbus 0 for each
The implication of these payoffs is that the market demand is large enough to support only one manufacturer. If both firms enter, both will sustain a loss.
Identify two possible equilibrium outcomes below in this game.
i. Boeing produces and Airbus does not.
ii. Airbus produces and Boeing does not.
iii. Both Airbus and Boeing produce.
iv. Neither Airbus nor Boeing produce.
Statements:
a) iii and iv
b) ii and iii
c) i and ii
d) i and iii are true.