A case study in the chapter describes a phone conversation between the presidents of American Airlines and Braniff Airways. Analyze the game 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 profits if the other company also charges $300, and high profits if the other company charges $600.

On the other hand, if the company charges $600, it earns very low profits if the other company charges $300 and medium profits if the other company also charges $600.

Complete the following decision box for this game. American's profits are on the left in each situation, Braniff's on the right.

Braniff's Decision

High Price Low Price

American's Decision High Price , ,

Low Price , ,

The Nash equilibrium outcome in this game is for American to set aprice and for Braniff to set a.

True or False: The Nash equilibrium is the best outcome for both airlines.

True

False