Babao, Mark Anthony L.

BSA 2.1

STI College Batangas

Managerial Economics

1. What kind of game (according to outcome and sequence) is Crandall

proposing to Putnam?

Based on the given case presented, in accordance with the outcome, Crandall is proposing

a positive-sum game to Putnam. As we all know, in positive sum game, these are game with the

potential for mutual profit; they gained profit equally. In line with this, it is a kind of win-win

relationship. In the scenario, both Crandall and Putnam will make more money in the end. On the

other hand, in accordance with the sequence, the case refers to a kind of sequential-move game

wherein player moves first, then the other gets to respond. In some words, moves are made

alternately - in succession or in alternate order because in Crandall's suggestion, Putnam will make

a move first wherein he will raise fares of 20 percent and therefore Crandall gets to respond

wherein he will raise his fares in the next day.

2. If Putnam agreed with Crandall's proposal, how will this decision affect the

buyers?

Robert Crandall is the president of American Airlines while Howard Putnam is the

president of Braniff airways as stated in the case study. In this case, If Putnam agreed with
Crandall's proposal, then the Braniff airways should raise 20 percent fares and American Airlines

should also raise in the next day. In line with this, the two airlines will both gain profit. It will be

beneficial to them since the fares of each passenger will automatically raise to 20 percent.

Nevertheless, their decision will totally affect the buyers/passengers because the fare price is more

expensive. As we all know, money is also an important factor in our daily living therefore, people

create financial budget. It will have a negative effect in passenger’s budget which may results to

financial burden. In some cases, most of the passengers may possibly choose other airlines which

is the fare price is fair and right because not all passengers can afford to pay such expensive fare.