-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what will happen if the government offers a $30 subsidy to airlines that serve this route?
A) Both firms will enter profitably.
B) Firm A will decide not to enter since firm B will.
C) Firm B is still better off not entering.
D) Neither firm will have a dominant strategy.

Question

-The above figure shows the payoff to two airlines,A and B,of serving a particular route.If the two airlines must decide simultaneously,what will happen if the government offers a $30 subsidy to airlines that serve this route?
A) Both firms will enter profitably. 
B) Firm A will decide not to enter since firm B will. 
C) Firm B is still better off not entering. 
D) Neither firm will have a dominant strategy.

Quizplus · Accepted Answer

With a $30 subsidy, both firms can enter profitably because the subsidy offsets their losses or increases their profits, making the route attractive to both.

-The Above Figure Shows the Payoff to Two Airlines,A and B,of