1. Boeing and Airbus are the world's only maj producers of large, wide-bodied aircrafts. But with the cost of fuel increasing and changing demand in the airline industry, the need for smaller regional jets has increased. Suppose that both firms mustdecide whether they will produce a smaller plane. Both Boeing and Airbus have to decide whether they produce large, small or not produce without knowing the other's decision. The resulting payoffs are shown in the following matrix (in millions of U. S. dollars). Assume that each producerchooses to either produce only large, only small, or no planes at all. Airbus Large Planes Small Planes Not Produce Large Planes 80,45 90.30 115,0 Boeing Small Planes 125.100 100.70 50.10 Not Produce 0.100 0.125 * The first number in each cell is pavoffto Boeing and the second number indicates that for Airbus a What is the Nash equilibrium of this game? b. The US government believes that producing large plane has positive external effect on other industries such as aero-space and defense industry. The US, therefore, decide to provide subsidy to Boeing to make them produce large plane. What is the minimum amount of subsidy that Boing must receive to ensure that outcome as the unique Nash equilibrium?| 1. Boeing and Airbus are the world's only maj producers of large, wide-bodied aircrafts. But with the cost of fuel increasing and changing demand in the airline industry, the need for smaller regional jets has increased. Suppose that both firms mustdecide whether they will produce a smaller plane. Both Boeing and Airbus have to decide whether they produce large, small or not produce without knowing the other's decision. The resulting payoffs are shown in the following matrix (in millions of U. S. dollars). Assume that each producerchooses to either produce only large, only small, or no planes at all. Airbus Large Planes Small Planes Not Produce Large Planes 80,45 90.30 115,0 Boeing Small Planes 125.100 100.70 50.10 Not Produce 0.100 0.125 * The first number in each cell is pavoffto Boeing and the second number indicates that for Airbus a What is the Nash equilibrium of this game? b. The US government believes that producing large plane has positive external effect on other industries such as aero-space and defense industry. The US, therefore, decide to provide subsidy to Boeing to make them produce large plane. What is the minimum amount of subsidy that Boing must receive to ensure that outcome as the unique Nash equilibrium?|