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Using Game Theory in the Airline Industry.

Two airlines, A and B, are deciding to choose whether Atlanta or Chicago should be their major hub. Given the diagram below, find ALL equilibria of this game. (see attached file)

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Two airlines, A and B, are deciding to choose whether Atlanta or Chicago should be their major hub. Given the diagram below, find ALL equilibria of this game.

AIRLINE A

Atlanta Chicago
AIRLINE B Atlanta ($40m,$40m) ($85m,$60m)
Chicago ($60m,$85m) ...

Solution Summary

Given a payoff matrix I outline the process of determining whether either firm has a dominant strategy. Next, I determine the Nash equilibrium or equilibria that exist.

$2.19