Consider the problem faced by an airline (QANTAS) when it wants to reduce the amount of carry-on luggage for passengers. Assume there are two possible approaches: ‘current policy' and ‘tighter standards'. Further assume there is one other airline called Virgin. If both QANTAS and Virgin adopt the current policy the payoff for QANTAS is 0 and the payoff for Virgin is 0. If QANTAS adopts a ‘tighter policy' and Virgin adopt the ‘current policy' the payoff for QANTAS is -5 and the payoff for Virgin is 5. If QANTAS adopts the ‘current policy' and Virgin adopt the ‘tighter policy' the payoff for QANTAS is 5 and the payoff for Virgin is -5. If both QANTAS and Virgin adopt the ‘tighter policy' the payoff for QANTAS is 2 and the payoff for Virgin is 2. If Qantas and Virgin make their choice simultaneously which of the following statements is true?
- Both QANTAS and Virgin have a dominant strategy.
- There is a unique Nash Equilibrium to this game in which both choose ‘current policy'.
- The non-cooperative solution does not maximise total surplus.
- a, b and c are correct.
- None of the above.