Optimal choices in each

profile are indicated by

an arrow. Two arrow in a
strategy profile indicates
a Nash equilibrium
Players
Strategy profiles
Export/production
subsidies (change with
spinner)
Payoffs (profits), change
with spinner. Bottom left
is Airbus
Strategies
The Boeing vs Airbus Example of Strategic Trade Policy
This sheet sets out the classic strategic trade policy example of Airbus vs Boeing. Any payoff can be altered using the spinners,
as can the subsidy levels, and the Nash equilibria will automatically be highlighted with two arrows.
-1

-1 -> 100
100 <-
->
0 0
Airbus Subsidy 0
Boeing Subsidy 0
The 'stylized facts' of this story are that Boeing and Airbus are considering production of a new jet that will be sold in
a third market. The investment costs are sufficiently high that if both firms enter the market they will not be able to
cover their investment and will make a loss. However, the market would be profitable to one firm alone. The question
is whether a subsidy to either company could help it capture the market
Boeing
A
i
r
b
u
s
Produce
Don't Produce
Produce Don't Produce
This sheet sets out the classic strategic trade policy example of Airbus vs Boeing. Any payoff can be altered using the spinners,
as can the subsidy levels, and the Nash equilibria will automatically be highlighted with two arrows.
0 <-
0
The 'stylized facts' of this story are that Boeing and Airbus are considering production of a new jet that will be sold in
a third market. The investment costs are sufficiently high that if both firms enter the market they will not be able to
cover their investment and will make a loss. However, the market would be profitable to one firm alone. The question
Boeing
Don't Produce