Boeing and Airbus are the main producers of commercial airplanes and dominate the markets for wide-bodied super jumbos and for smaller planes. Passenger traffic is predicted to create a demand for 9,000 new smaller and more fuel-efficient wide-bodied planes over the next 20 years.

a. In what type of market are comercial airplanes sold?

b. Thinking of competition between Boeing and Airbus as a game, what are the strategies and the payoffs?

c. Set out a hypothetical payoff matrix for the game you’ve described in part (b). What is the equilibrium of the game?

d. Do you think the market for commercial airplanes is efficient? Explain and illustrate your answer.