Airlines sometimes find themselves in price wars. Consider the following game: Delta and United are the only
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Airlines sometimes find themselves in price wars. Consider the following game: Delta and United are the only two airlines flying the route from Houston, Texas, to Omaha, Nebraska. Each firm has two strategies: Charge a high price or charge a low price.
a. What (if any) is the dominant strategy for each firm?
b. Is this game a prisoner’s dilemma? Briefly explain.
c. How could repeated playing of the game change the strategy each firm uses?
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a Deltas dominant strategy is to charge a low price If United charges a high price Delta will gain market share and make a profit by charging a low pr...View the full answer
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