8. Refer to Problem 7. Now suppose the European government wants Airbus to be the sole producer in the lucrative small-aircraft market. Then answer the following:

a. What is the minimum amount of subsidy that Airbus must receive when it produces small aircraft to ensure that outcome as the unique Nash equilibrium?

b. Is it worthwhile for the European government to undertake this subsidy?

Transcribed Image Text:

Airbus Small planes Not produce -5 125 0 Large planes Large planes 10 10 115 115 100 0 0 Boeing Small planes 150 15 150 100 125 0 Not produce 0 0 0