9. The figure below shows the payoff to two airlines, A and B, of serving a part
ID: 1125008 • Letter: 9
Question
9. The figure below shows the payoff to two airlines, A and B, of serving a particular route Firm B Do Not Enter Enter -20 Enter 0 10 50 40 Do Not Enter 0 0 If the two airlines must decide simultaneously, which one of the following statements is TRUE? A. Neither firm entering is a Nash equilibrium. B. Since firm B's decision is unpredictable, firm A's decision is unpredictable C. Firm B will not enter because it knows firm A D. Since firm B has no dominant strategy, its decision is unpredictable e g route.I1 10. The above figure shows the payoff to two airlines, A and B, of serving a particular route. If the tweo what happens if airlines must decide simultaneously, what happens if the government imposes a S20 per firm tax on firms that service this route? A. Neither firm entering is a Nash equilibrium B. Only firm A will enter C. Neither firm has a dominant strategy D Not entering is a dominant strategy for both firms.Explanation / Answer
9. The correct answer is C. (Enter, Do Not enter) will be a Nash equilibrium of this game. The correct answer is thus C.
10. The correct answer is B. We have (Enter. Not enter) as the Nash equilibrium and enterring is the dominant strategy for Firm A. The correct answer is B.
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