Figure 13-1

Suppose the airline industry is an oligopoly with two competing firms, VolAir and ClearJet. Assume each airline sells tickets that are virtually identical and customers have no loyalty to either airline. Possible pricing outcomes in the market are displayed on the graph to the left, while the two airlines’ best response functions according to the Cournot model are shown on the graph to the right.

Refer to Figure 13-1. Which point on the Cournot best response function graph corresponds to the Nash equilibrium outcome?

Question

Figure 13-1

Suppose the airline industry is an oligopoly with two competing firms, VolAir and ClearJet. Assume each airline sells tickets that are virtually identical and customers have no loyalty to either airline. Possible pricing outcomes in the market are displayed on the graph to the left, while the two airlines’ best response functions according to the Cournot model are shown on the graph to the right.

Refer to Figure 13-1. Which point on the Cournot best response function graph corresponds to the Nash equilibrium outcome?

BlackTom AI · Accepted Answer

Nash equilibrium in a Cournot duopoly is the point where each firm’s chosen quantity is the best response to the other firm’s quantity — graphically, the intersection of the two best-response curves.

1) Relevant knowledge points and concepts  
- Cournot model: each firm simultaneously chooses output (quantity); best-response function gives the profit-maximizing quantity of one firm for any given quantity of the rival.  
- Nash equilibrium: a pair of quantities (q_VolAir, q_ClearJet) where VolAir’s choice is a best response to ClearJet’s choice and vice versa. Graphically this is the crossing point of the two best-response lines.

2) Step-by-step reasoning  
- Look at the right-hand graph: the downward-sloping line labeled “VolAir’s best response” and the other line labeled “ClearJet’s best response.”  
- Identify the point where those two lines cross; that point is the only output pair where each firm is simultaneously best responding to the other.

3) Intermediate calculation/reading of coordinates  
- The intersection is labeled B on the diagram. Reading the axes, B corresponds to about 1,200 tickets for VolAir (x-axis) and 1,200 tickets for ClearJet (y-axis). Those quantities satisfy both firms’ best-response conditions.

4) Why the correct answer is correct  
- At B both firms are on their respective best-response curves, so neither firm can increase profit by unilaterally changing its output. That is exactly the definition of a Nash equilibrium in Cournot competition.

5) Why the other options are incorrect  
- A lies on VolAir’s best-response curve but not on ClearJet’s: ClearJet would want to change output if VolAir were at A, so A is not mutual best response.  
- C lies on ClearJet’s best-response curve but not on VolAir’s.  
- D is off the intersection as well (one firm would deviate). None of A, C, or D simultaneously satisfy both firms’ best-response conditions.

6) Conclusion confirming the answer  
- Therefore the Nash equilibrium outcome corresponds to point B.

类似问题

In a non-cooperative, imperfect information, simultaneous-choice, one-period game, a Nash equilibrium

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 is the Nash equilibrium?

Question 4.82 Choose the correct answerRead the following statements about dominant strategies and select the correct one.

Question 4.30 Choose the correct answer(s)Read the following statements regarding Nash equilibrium and select the correct one(s).

What was the world's first widely adopted biodiversity policy?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单