SCENARIO: PAYOFF MATRIX FOR AIRBUS AND BOEING
The payoff matrix supplied shows outcomes of various strategies
That Airbus and Boeing might follow in response to action on the
Part of the other company.This payoff matrix describes actions
In developing socalled superjumbo jets that can carry 600 or
More passengers.In each element, the lowerleft value gives
The outcome for Boeing based on the action of Airbus and the
Upperright value gives the outcome for Airbus based on the
Action of Boeing.For example, in element A, each company will
Lose $10 million if they both decide to produce superjumbo jets.
(Scenario: Payoff Matrix for Airbus and Boeing) Which elements
Are a Nash equilibria?
A)D and B
B)A and C
C)B and D
D)B and C

Question

SCENARIO: PAYOFF MATRIX FOR AIRBUS AND BOEING
The payoff matrix supplied shows outcomes of various strategies
That Airbus and Boeing might follow in response to action on the
Part of the other company.This payoff matrix describes actions
In developing so­called super­jumbo jets that can carry 600 or
More passengers.In each element, the lower­left value gives
The outcome for Boeing based on the action of Airbus and the
Upper­right value gives the outcome for Airbus based on the
Action of Boeing.For example, in element A, each company will
Lose $10 million if they both decide to produce super­jumbo jets. 
(Scenario: Payoff Matrix for Airbus and Boeing) Which elements
Are a Nash equilibria?
A)D and B 
B)A and C 
C)B and D 
D)B and C

Quizplus · Accepted Answer

The Nash equilibria are the elements where neither company can improve their outcome by changing their strategy while the other company keeps their strategy constant. In this case, the Nash equilibria are elements B and D, where one company produces the super-jumbo and the other does not. In element B, Boeing produces and Airbus does not, resulting in Boeing's payoff of $15 million and Airbus's payoff of -$5 million. In element D, Airbus produces and Boeing does not, resulting in Airbus's payoff of $15 million and Boeing's payoff of -$5 million. Therefore, the best choice for both companies is to produce different types of planes rather than both producing the super-jumbo.