Question
Assume that Boeing (B) and Airbus (A) dominate the global production of passenger aircraft. In effect, there is a duopoly when it comes to the
Assume that Boeing (B) and Airbus (A) dominate the global production of passenger aircraft. In effect, there is a duopoly when it comes to the production of passenger aircraft. Assume that the price of a new aircraft (in millions of dollars) is determined by the price function, P = 180 - Q, where Q = qB + qA. In other words, Q is the total quantity of new passenger aircraft, which is determined by the number of aircraft produced by Boeing (qB) and by Airbus (qA). Assume that the cost of building a new passenger aircraft is $30 million for both Boeing and Airbus. In other words, cB = cA = c = 30, where each aircraft is measured in millions of dollars.
1.) What is the profit function for Boeing?
2.) What is the profit function for Airbus?
3.) What is the best response function in terms of choosing how many aircraft to produce for Boeing
4.) What is the best response function in terms of choosing how many aircraft to produce for Airbus
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