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Question:  Does Blue Skies have a dominant strategy?  If yes, what is it?
Answer:   Yes, Blue Skies' dominant strategy is to implement a frequent flyer program.  If Soft Landings implements one too, Blue Skies is better off ($20,000 profit compared to $10,000).  If Soft Landings does not implement a frequent flyer program, Blue Skies is still better off ($30,000 profit compared to $15,000).  No matter what Soft Landings does, Blue Skies is better off with a frequent flyer program.

Question:  Does Soft Landings have a dominant strategy?  If yes, what is it?
Answer:   No, Soft Landings does not have a dominant strategy.  If Blue Skies initiates a frequent flyer program, Soft Landings is better off having one too ($50,000 profit compared to $40,000).  Still, if Blue Skies does not initiative a frequent flyer program, Soft Landings is better off not initiating a frequent flyer program on their own ($45,000 profit compared to $25,000).

Question:  Imagine you are the economic advisor for the Blue Skies company -- what would you advise this company to do?
Answer:   Since Blue Skies has a dominant strategy, you should advise the company to go ahead and add the program.

Question:  Imagine you are the economic advisor for the Blue Skies company -- what would you advise this company to do?
Answer:   Since Soft Landings does not have a dominant strategy, you should advise the company CEO to wait and see what Blue Skies does first.  Then if Blue Skies initiates a frequent flyer program, Soft Landings should do the same.  However, if Blue Skies does not start a frequent flyer program, Soft Landings is better off without a frequent flyer program.





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