Question: HELP EXPLAIN THIS Suppose Airbus and Boeing compete only in the world market. Both firms have identical cost structures, and they compete in Nash-Cournot fashion.

HELP EXPLAIN THIS

HELP EXPLAIN THIS Suppose Airbus and Boeing compete only in the world

Suppose Airbus and Boeing compete only in the world market. Both firms have identical cost structures, and they compete in Nash-Cournot fashion. (1) Explain why in a one-shot, simultaneous move game, neither firm can reach the Stackelberg equilibrium or collude with the other firm. (il) Explain what type of policy the EU can pre-commit to that will improve the profit position of Airbus? How does this policy affect the EU's terms of trade? Why does the EU commit to such a policy? (ill) If both the EU and the US governments pre-commit to a policy, why in principle would an export tax be optimal? Given the structure of the game, what policies would the two governments rationally commit to and why? What policy outcome would the WTO be able to enforce in this game? (iv) Explain why if the firms instead play a Nash-Bertrand game in the world market, the two governments will have an incentive to use an export tax which benefits both firms. (v) Assuming now that there is US domestic consumption of wide-bodied jet aircraft, trace out the economic effects of the WTO allowing the US to impose tariffs on imports of Airbus aircraft, where Boeing and Airbus play a Nash-Cournot game

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