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– Nelson Mandela

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Wk8_Assignment

Wk8_Assignment

Q For this assignment you’ll need to make a game matrix. There are two players, Boeing and Airbus. They both have the same two strategies, ‘Produce’ or ‘Don’t Produce’. Here’s the data for the matrix: If Boeing Produces, and Airbus Produces, Boeing gets -5 and Airbus gets -5 If Boeing Produces, and Airbus Don’t Produce, Boeing gets 100 and Airbus gets 0 If Boeing Don’t Produce and Airbus Produces, Boeing gets 0 and Airbus gets 100 If Boeing Don’t Produce and Airbus Don’t Produce, Boeing gets 0, Airbus gets 0. Make your matrix, then use it to evaluate: 1. Suppose Airbus is set to produce the aircraft before Boeing. Which company will enter the market? 2. Suppose both governments offer their respective company a subsidy of $4 (million). 3. Suppose both governments offer their respective company a $10 million subsidy. 4. Suppose the U.S. government, home to Boeing, (but not Europe, home to Airbus,) offers a $10 million subsidy? 5. How could the U.S. government justify its decision to offer a subsidy to a profitable and successful business?

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Airbus Produce Don’t produce Boeing Produce -5,-5 100,0 Don’t produce 0,100 0,0 Now if Airbus is set to produce the aircraft before Boeing then Airbus will first enter the market. Secondly if both government offers $4 to produce then