Export Policies in ResourceBased and HighTechnology Industries

Boeing and Airbus are the world's only major producers of large widebodied aircrafts. But the increasing cost of fuel and the changing demand in the airline industry increases the need for smaller regional jets. Suppose that both firms must decide whether they will produce a smaller plane. We will assume that Boeing has a slight cost advantage over Airbus in both large and small planes, as shown in the payoff matrix below in millions of U.S. dollars. Assume that each producer chooses to produce only large, only small, or no planes at all.

Airbus Large planes Small planes Not produce -5 125 0 Large planes Feenstra/Taylor, International Trade, 5e@ 2021 Worth Publishers 10 115 115 100 O 0 Boeing Small planes 150 15 150 100 125 0 Not produce 0 0 0