You run Kona Air, a small entrant in the Hawaii inter - island airline market. The market is currently dominated by a single incumbent airline, Hawaiian Air ( HA ) , that has 1 0 0 % of the market. Suppose customer WTP is $ 3 0 0 , for both Kona and HA , and that MC = $ 1 0 0 for both as well. Suppose further Kona has chosen FAREK = $ 2 5 0 and N = 4 0 0 , and HA has chosen FAREH = $ 3 0 0 . How many customers will each airline serve? What will be each airline ' s profits? 2 . Is $ 3 0 0 the best fare for HA ? If not, what fare should it charge in response to Kona ' s pricing and targeting strategy in ( 1 ) ? What will be each firm ' s profits in that scenario? 3 . More generally, HA ' s choices to " undercut " Kona and serve the entire market or " accommodate " and allow Kona to serve its targeted customers will depend on WTP K , WTPH , FAREK and N . Try