Imagine two fictional airline manufacturing companies, Nechako Jet and Air Fraser, are in a fierce competition to sell their corporate jets.In 2019, Nechako's "Brown Bear" has 1500 orders. Fraser's "Wolverine" has 1550 orders this year.

Background Data:

AIRCRAFT Aircraft

Nechako FRASER VOLVERINE

Brown Bear PRICE

PRICE $18,500,000

$19,000,000

Fraser

Wolverine

$18,500,000

Assumptions:

Assume that the performance and operating costs of the two aircraft are the same.

At list price, both Nechako and Fraser can get another 200 orders each, and make 4 Mn in economic profit.

At discounted prices, each manufacturer can get an additional 225 orders each and make 2 Mn in economic profit.

If one keeps the list price and the other discounts, the discounter can get 450 new orders and make 6 Mn, and the other will get no new orders

a)What type of market is described above? (2 pts)

b)Given the assumptions above, will the companies discount their prices, or stick to list price?Answer this question by illustrating the payoff matrix: (8 pts)

c)Identify the Nash Equilibrium and name the game strategy they will pursue. (4 pts)