This payoff matrix describes actions in developing socalled
Superjumbo jets that can carry 600 or more passengers.
In each element, the lower left value gives the outcome
For Boeing based on the action of Airbus and the upper
Right value gives the outcome for Airbus based on the
Action of Boeing.For example, in element A, each
Company will lose $10 million if they both decide to
Produce superjumbo jets.
Payoff Matrix for Airbus and Boeing
(Scenario: Payoff Matrix for Airbus and Boeing) Now
Suppose that the U.S.government decides to provide a
$50 million subsidy to Boeing in order to encourage it to
Produce superjumbo jets.Boeing decides to take the
Subsidy.Using the payoff matrix, what is Airbus's best
Strategy?
A)continue to produce superjumbo jets because its profits will not be affected
B)continue to produce superjumbo jets even though its profits will fall
C)discontinue producing superjumbo jets because its losses are lower than if it produced superjumbo jets
D)discontinue producing superjumbo jets because it would neither lose nor earn more profits by producing Superjumbo jets

Question

This payoff matrix describes actions in developing so­called
Super­jumbo jets that can carry 600 or more passengers.
In each element, the lower­ left value gives the outcome
For Boeing based on the action of Airbus and the upper­
Right value gives the outcome for Airbus based on the
Action of Boeing.For example, in element A, each
Company will lose $10 million if they both decide to
Produce super­jumbo jets.
Payoff Matrix for Airbus and Boeing 
(Scenario: Payoff Matrix for Airbus and Boeing) Now
Suppose that the U.S.government decides to provide a
$50 million subsidy to Boeing in order to encourage it to
Produce super­jumbo jets.Boeing decides to take the
Subsidy.Using the payoff matrix, what is Airbus's best
Strategy?
A)continue to produce super­jumbo jets because its profits will not be affected 
B)continue to produce super­jumbo jets even though its profits will fall 
C)discontinue producing super­jumbo jets because its losses are lower than if it produced super­jumbo jets 
D)discontinue producing super­jumbo jets because it would neither lose nor earn more profits by producing Super­jumbo jets

Quizplus · Accepted Answer

With the $50 million subsidy, Boeing's profits will increase regardless of Airbus's decision. However, the payoff matrix shows that Airbus will lose less if it discontinues producing super-jumbo jets. Therefore, the best strategy for Airbus is to discontinue producing super-jumbo jets.

This Payoff Matrix Describes Actions in Developing So­called

This Payoff Matrix Describes Actions in Developing Socalled