Answer:
Nash equilibrium exists when both companies charge $100 per ticket and each makes $81,000 in profits.
Explanation:
United
ticket price $100 ticket price $200
$81,000 / $58,000 /
ticket price $100 $81,000 $123,000
American
$123,000 / $112,000 /
ticket price $200 $58,000 $112,000
United's dominant strategy is to charge $100 per ticket price with expected profits of $81,000 + $123,000 = $204,000. If it charges $200 per ticket, expected profits = $170,000.
American's dominant strategy is to charge $100 per ticket price with expected profits of $81,000 + $123,000 = $204,000. If it charges $200 per ticket, expected profits = $170,000.
Since both companies' dominant strategy is to charge $100 per ticket, then that is the Nash equilibrium.
