(Scenario: Payoff Matrix for Airbus and Boeing) The payoff matrix supplied shows outcomes of various strategies that Airbus and Boeing might follow in response to action on the part of the other company. This payoff matrix describes actions in developing so-called 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. Boeing has decided NOT to produce superjumbo jets. Instead, it will continue to market its 450-passenger 747s. However, Airbus will produce superjumbo jets. Is Boeing's decision correct?
A) Yes; because it would lose profits if it produced a superjumbo jet.
B) No; because it could earn more profits by producing a superjumbo jet.
C) Yes; because it would neither lose nor earn more profits by producing a superjumbo jet.
D) No; because it would lose more profits if it produced a superjumbo jet.

Question

(Scenario: Payoff Matrix for Airbus and Boeing) The payoff matrix supplied shows outcomes of various strategies that Airbus and Boeing might follow in response to action on the part of the other company. This payoff matrix describes actions in developing so-called 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.  Boeing has decided NOT to produce superjumbo jets. Instead, it will continue to market its 450-passenger 747s. However, Airbus will produce superjumbo jets. Is Boeing's decision correct?
A) Yes; because it would lose profits if it produced a superjumbo jet. 
B) No; because it could earn more profits by producing a superjumbo jet. 
C) Yes; because it would neither lose nor earn more profits by producing a superjumbo jet. 
D) No; because it would lose more profits if it produced a superjumbo jet.

Quizplus · Accepted Answer

Based on the given payoff matrix, if Boeing produces a superjumbo jet and Airbus produces a traditional jet, Boeing will lose $50 million. On the other hand, if Boeing continues to produce traditional jets while Airbus produces superjumbo jets, Boeing will earn a profit of $20 million. Thus, Boeing's decision not to produce superjumbo jets is correct because it would lose profits if it produced a superjumbo jet.

(Scenario: Payoff Matrix for Airbus and Boeing) the Payoff Matrix