7. Problems and Applications Q? A case study in the chapter describes a phone conversation between the presidents of American Airlines and Brani' Airways. Let's use game theory to analyze the interaction between the two companies. Suppose that each company can charge either a high price for tickets or a low price. If one company charges $300, it earns low prots if the other company also charges $300, and high prots if the other company charges $500. On the other hand, if the company charges $600, it earns very low profits if the other company charges $300 and medium prots if the other company also charges $600. Complete the foiiowing decision box for this game. Americans prots are on the ieft in each situation, Branis on the right. Brani's Decision High Price Low Price High Price v , v v . V American's Decision Low Price v , v v . V The Nash equilibrium outcome in this game is for American to set a V price and for Braniff to set a V True or False: Consumers would lose if the two airlines collude to earn higher prots than those given by the Nash equilibrium. 0 True 0 False Continue without saving