How offer a subsidy to a profitable and successful business

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Reference no: EM13184575

Given the following payoff matrix, suppose Airbus is set to produce the aircraft before Boeing.

Boeing/Airbus

Produce Don't Produce

Produce -5/ -5 100/0

Don't Produce 0/100 0/0

a. Which company will enter the market?

b. Suppose both governments offer their respective company a subsidy of $4(million). Which company will enter the market?

c. Suppose both governments offer their respective company a $10 million subsidy. Which company will enter the market?

d. Suppose the U.S. government (but not Europe) offers a $10 million subsidy Which company will enter the market?

e. How could the U.S. government justify its decision to offer a subsidy to a profitable and successful business?

Reference no: EM13184575

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