-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what will happen if the government offers a $30 subsidy to airlines that serve this route?
A)The Nash equilibrium remains the same.
B)Only firm A will have a dominant strategy.
C)Both firms will choose to enter the market.
D)Joint profits will be maximized.

Question

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what will happen if the government offers a $30 subsidy to airlines that serve this route?
A)The Nash equilibrium remains the same. 
B)Only firm A will have a dominant strategy. 
C)Both firms will choose to enter the market. 
D)Joint profits will be maximized.

Quizplus · Accepted Answer

With a $30 subsidy, both firms will have increased payoffs for entering the market, making it more attractive for both to serve the route despite the competition. This leads to both firms choosing to enter the market.

-The Above Figure Shows the Payoff to Two Airlines,A and B,of