The above figure shows the payoff to two airlines, A and B, of serving

The above figure shows the payoff to two airlines, A and B, of serving a particular route.

If the two airlines must decide simultaneously, and the government imposes a $20 per firm tax on firms that service this route, which of the following maximizes the firms’ joint profits? A) Neither firm services the route.
B) Firm A offers firm B $20 to not enter.
C) Both firms will service this route.
D) Firm B offers firm A $30 to not enter.

ANSWER

B