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Recall the payoff matrix from the previous problem. United Airlines Increase Maintain flights Increase flights 7,7 50 , 10 American Airlines Maintain 10 , 40
Recall the payoff matrix from the previous problem. United Airlines Increase Maintain flights Increase flights 7,7 50 , 10 American Airlines Maintain 10 , 40 9,9 Now suppose that, in an effort to incentivize American Airlines, the U.S. government decides to offer American an $5 million subsidy if they decide to increase their number of flights. This subsidy will be paid to American regardless of United's actions. Based on this subsidy, what is the Nash equilibrium in this subsidized game? (Hint: first work out how the subsidy will change the matrix of payoffs). O American increases its number of flights, and United also increases its number of flights. O American increases its number of flights, and United maintains its number of flights. O There are two Nash equilibria: (1) United increases its number of flights and American maintains its number of flights; (2) American increases its number of flights and United maintains its number of flights. O There is no Nash equilibrium in this game. O None of the answer choices are consistent with the game's outcome
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