American Airlines (A) and the Hawaiian Airlines (H) are two large airline

in US market. The market has Market Demand:

QM = 160 3P

where QM denotes the number of passengers of the total market per day.

The American Airlines operates with a Fixed Cost of $2500 per day no

matter the plane flies or not and Marginal Cost of $8 per passengers.

Therefore the daily Total Cost for American Airlines is TCA = 8QA + 2500

While the Hawaiian Airlines operates with a lower Fixed Cost of $1800

per day no matter the plane flies or not but higher Marginal Cost of $15

per passengers. Therefore the daily Total Cost for Hawaiian Airlines is

TCH = 12QH + 1800

c. Setup the Prot Maximization Problem for both airlines. What is

the Reaction Curve (Best Response Function) for each airlines?

d. Find the Nash Equilibrium in this Cournot Competition, i.e. nd

the optimal quantity bundle (QCA;QCH).

e. What are the Total passengers carried (QC), Prot for each airlines

(CA and CH), and the Market Price for the air ticket (PC) in this Cournot Competition.