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QUESTION 6B: Assume that two airline companies AA and BB, decide to engage in collusive behaviour. Let's analyse the game between AA and BB. Suppose
QUESTION 6B: Assume that two airline companies AA and BB, decide to engage in collusive behaviour. Let's analyse the game between AA and BB. Suppose that each company charges E120, it earns low profits if the other company charges $120 also, and high profits if the other company charges $240. On the other hand, if the company charges $240, it earns very low profits if the other company charges $120, and medium profits if the other company charges $240 also. a. Draw the payoff matrix for this game. (6 marks) A 120 240 120 B 240 b. What is the Nash equilibrium in this game? Explain (6 marks)
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