Questions:1. What kind of game (according to outcome and sequence) is Crandall proposing to Putnam?2. If Putnam agreed with Crandall’s proposal, how will this decision affect the buyers? AN ILLEGAL PHONE CALLFirms in oligopolies have a strong incentive to collude to reduce production, raise price, andincrease profit. The great 18th-century economist Adam Smith was well aware of this potential marketfailure. In The Wealth of Nations he wrote. People of the same trade seldom meet together, but theconversation ends in a conspiracy against the public, or in some diversion to raise prices.To see a modem example of Smith's observation, consider the following excerpt of a phoneconversation between two airline executives in the early 1980s. The call was reported in The NewYork Times on February 24, 1983. Robert Crandall was president of American Airlines, and HowardPutnam was president of Braniff Airways.CRANDALL: I think itť's dumb as hel. to sit here and compete with each other and neither one of us makinga dime.PUTNAM: Do you have a suggestion for me?CRANDALL: Yes, I have a suggestion for you. Raise your fares 20 percent. I'll raise mine the next morning.PUTNAM: Robert, we-CRANDALL: You'll make more money, and I will, too.PUTNAM: We can't talk about pricing!CRANDALL: Oh, Howard. We can talk about anything we want to talk about.Putnam was right: The Sherman Antitrust Act of the US prohibits competing executives from even talkingabout fixing prices. When Putnam gave a tape of this conversation to the Department of Justice, it filedsuit against Crandall.Two (2) years later, Crandall and the Department of Justice reached a settlement in which Crandallagreed to various restrictions on his business activities, including his contacts with officials at otherairlines. The Department of Justice said that the terms of settlement would "protect competition in theairline industry, by preventing American and Crandall from any further attempts to monopolize passengerairline service on any route through discussions with competitors about the prices of airline services".

Question

Questions:1. What kind of game (according to outcome and sequence) is Crandall proposing to Putnam?2. If Putnam agreed with Crandall’s proposal, how will this decision affect the buyers? AN ILLEGAL PHONE CALLFirms in oligopolies have a strong incentive to collude to reduce production, raise price, andincrease profit. The great 18th-century economist Adam Smith was well aware of this potential marketfailure. In The Wealth of Nations he wrote. People of the same trade seldom meet together, but theconversation ends in a conspiracy against the public, or in some diversion to raise prices.To see a modem example of Smith's observation, consider the following excerpt of a phoneconversation between two airline executives in the early 1980s. The call was reported in The NewYork Times on February 24, 1983. Robert Crandall was president of American Airlines, and HowardPutnam was president of Braniff Airways.CRANDALL: I think itť's dumb as hel. to sit here and compete with each other and neither one of us makinga dime.PUTNAM: Do you have a suggestion for me?CRANDALL: Yes, I have a suggestion for you. Raise your fares 20 percent. I'll raise mine the next morning.PUTNAM: Robert, we-CRANDALL: You'll make more money, and I will, too.PUTNAM: We can't talk about pricing!CRANDALL: Oh, Howard. We can talk about anything we want to talk about.Putnam was right: The Sherman Antitrust Act of the US prohibits competing executives from even talkingabout fixing prices. When Putnam gave a tape of this conversation to the Department of Justice, it filedsuit against Crandall.Two (2) years later, Crandall and the Department of Justice reached a settlement in which Crandallagreed to various restrictions on his business activities, including his contacts with officials at otherairlines. The Department of Justice said that the terms of settlement would &#34;protect competition in theairline industry, by preventing American and Crandall from any further attempts to monopolize passengerairline service on any route through discussions with competitors about the prices of airline services&#34;.

Accepted Answer

Oligopoly: It refers to the firms that will work together if they want earn more profits. It refers…

What kind of game (according to outcome and sequence) is Crandall proposing to Putnam? 2. If Putnam agreed with Crandall’s proposal, how will this decision affect the buyers?