Question: Boeing Airbus Enter Don t Enter Enter ( - 3 , - 3 ) ( 4 , - 1 ) Don t Enter ( -

Boeing Airbus Enter Don

t Enter Enter

(- 3, - 3) (4, - 1)

Don

t Enter

(- 1, 4) (0, 0)

.

What are the Nash equilibria in this situation? Are the companies indifferent among equilibria? b

.

Suppose European governments believe it is of strategic importance that Airbus develop wide

-

body aircraft. The pledge to cover any losses Airbus will suffer if it enters the market. How does this change the payoff structure of the game? What are the new equilibria? Will European governments have to spend any money to bail Airbus out?

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