Horizon Helicopter Rides High Price Low Price Top Flight Hel

Horizon Helicopter Rides

High Price

Low Price

Top Flight Helicopter Rides

High Price

80, 80

50, 98

Low Price

98, 50

65, 65

Reference: Ref 12-4

Table 12.4

Horizon Helicopter Rides

Reference: Ref 12-4

(Table 12.4) The table shows payoffs as profits in thousands of dollars. Which of the following statements is TRUE?

	Horizon\'s dominant strategy is High Price.
	There are two Nash equilibria: (80, 80) and (65, 65).
	The Nash equilibrium occurs when both companies choose the Low-Price strategy.
	This game has no Nash equilibrium.

Nash equilibrium occurs when one firm decide their strategy based on what the other firm decides.

For Top Flight:

When Horizon sets Low Price, Top Flight decides Low price since is profit is higher (65 > 50).

When Horizon sets High Price, Top Flight decides Low price since is profit is higher (98 > 80).

For Horizon:

When Top Flight sets Low Price, Horizon decides Low price since is profit is higher (65 > 50).

When Top Flight sets High Price, Horizon decides Low price since is profit is higher (98 > 80).

So, Nash equilibrium occurs when both choose Low Price as strategy.