In a battle of Boeing and Airbus a Nash equilibrium will exist if
A)They both have agreed to a monopoly pricing structure
B)They are presently operating at a point where neither one would benefit by unilaterally changing strategies
C)Boeing has the power to drive Airbus out of business with a predatory pricing strategy
D)Both pass up profit opportunities because they fear retaliation

Question

Quizplus · Accepted Answer

A Nash equilibrium is a situation where no player would benefit from unilaterally changing their strategy. In the context of a battle between Boeing and Airbus, a Nash equilibrium would exist if both companies are presently operating at a point where neither would benefit from changing their strategies. This would mean that they have found a stable balance in terms of pricing, product development, market segmentation, etc. It does not require any specific agreement or power dynamics between the players. Option A is incorrect because a monopoly pricing structure would only benefit one player and cannot be considered an equilibrium. Option C is incorrect because predatory pricing is illegal and not a sustainable strategy for driving a competitor out of business. Option D is incorrect because fearing retaliation is not a sufficient condition for a Nash equilibrium. Both players need to have no incentive to deviate from their current strategies in order for a Nash equilibrium to exist.

In a Battle of Boeing and Airbus a Nash Equilibrium