Timely Buslines is earning $10.0 million a year economic profit on a route on wh

Question

Timely Buslines is earning $10.0 million a year economic profit on a route on which it has a monopoly. Comfort Buslines is considering entering the market and operating on this route. Timely threatens to cut the price to the point at which Comfort will make no profit if it enters. Comfort determines that the payoff matrix for the game with Timely is the one shown in the table. The numbers given are in millions of dollars. Comfort believe Timely's threat because does not; Timely will charge a higher price if Comfort enters the market and a lower price if it doesn't does; it makes good economic sense does; Comfort would do the same thing if roles were reversed does not; Timely will charge a higher price regardless of Comfort's enters; it will receive profit of $7.0 million rather than zero enters; it will receive profit of $5.0 million rather than zero does not enter; it will incur an economic loss does not enter; it will only break even if it enters, and it isn't worth the effort

Explanation / Answer

Comfort does believe Timely threat because comfort would do the same thing if roles were reversed. Obviously nobody would like to lose monopoly situation.

Comfort does not enter the market because it will only break even if it enters, and it isnt worth the effort.

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