In the mid-1990s, Value Jet wanted to enter the market serving routes that would compete head to
Question:
a) If Value Jet and Delta choose their strategies simultaneously, what strategies would the two firms choose at the Nash equilibrium, and what would be the payoff for Value Jet? Explain.
b) As it turned out, Value Jet decided to move first, entering on a small scale. It communicated this information by issuing a public statement announcing that it had limited aspirations in this marketplace and had no plans to grow beyond its initial small size. Analyze the sequential game in which Value Jet chooses "small" or "large" in the first stage and then Delta accommodates or starts a price war in the second stage. Did Value Jet enhance its profit by moving first and entering on a small scale? If so, how much more did it earn with this strategy? If not, explain why not?
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