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Find the subgame perfect equilibrium

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    Assignment ID: FG133134420

    Question – AirTrain and BigJet are considering starting nonstop service from Pittsburgh to Las Vegas. Assume that no other airlines serve this route. Market demand is such that if there is one airline serving the Pittsburgh to Las Vegas route the profit will be $20000. If two airlines serve the route, each will lose $5000. If an airline chooses not to enter this market, their profit is $0.

    Illustrate the game in extensive (tree) form, if the decision is made sequentially, with AirTrain moving first. Find the two pure strategy Nash equilibria. Find the subgame perfect (backwards induction) equilibrium.

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