Table 14-1

LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount.
-Refer to Table 14-1.What is the Nash equilibrium in this game?

Question

Table 14-1
  
LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount.
-Refer to Table 14-1.What is the Nash equilibrium in this game?

Quizplus · Accepted Answer

The Nash equilibrium occurs when both companies choose the strategy that maximizes their own profits given the other company's strategy. In this case, if LimoZeenz offers the discount, they will earn $8,000 and if AirPorter offers the discount, they will earn $7,000. However, if neither company offers the discount, they will each earn $10,000. Therefore, the best choice for both companies is to not offer the discount, leading to a Nash equilibrium where both companies do not offer the discount.

Table 14-1 LimoZeenz and AirPorter and Are the Only Two Airport Shuttle