Answer
a) Please see the picture.
b) Both companies should charge 300 dollars.
c) Yes, there is a better outcome than the Nash equilibrium.
Work Step by Step
a) The picture shows the decision box for the scenario.
b) If Braniff charges 600 dollars, American should charge 300 dollars. If Braniff charges 300 dollars, American should charge 300 dollars. Regardless of Braniff's choice, American should charge 300 dollars.
If American charges 600 dollars, Braniff should charge 300 dollars. If American charges 300 dollars, Braniff should charge 300 dollars. Regardless of American's choice, Braniff should charge 300 dollars.
c) For the better outcome, both companies would need to charge 600 dollars. This could be achieved by a simultaneous price increase or some type of cartel. However, consumers would be made worse off.
