Table 14-1 LimoZeenz and AirPorter and Are the Only Two Airport Shuttle

question 171

Multiple Choice

Table 14-1

LimoZeenz and AirPorter and are the only two airport shuttle and limousine rental service companies in the mid-sized town of Shady Shores. Each firm must decide on whether to offer its customers a mid-week discount for airport transportation. Table 14-1 shows the payoff matrix for profits earned by each company based on either offering or not offering the discount.
-Refer to Table 14-1.Let's suppose the game starts with each firm offering the mid-week discount so that LimoZeenz earns a profit of $6,000 and AirPorter earns a profit of $12,000.Is there an incentive for any one firm to stop offering the mid-week discount?

• A)No, neither firm has an incentive to stop offering the discount.
• B)Yes, both firms have an incentive to stop offering the discount.
• C)Yes, AirPorter has an incentive to stop offering the discount, but LimoZeenz does not.
• D)Yes, LimoZeenz has an incentive to stop offering the discount, but AirPorter does not.

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Definitions:

Interest Calculations

The process of determining the amount of interest due on a loan or investment based on the rate, principal amount, and time period.

Journalize

The process of recording financial transactions in a company's journal, detailing the accounts affected and the amounts.

Merchandise

Goods that are bought and sold in the course of business operations, often referred to as inventory in a retail context.

Contingent Liability

A potential financial obligation that may arise depending on the outcome of a future event.