Game theory and Airbus’ formidable backlog problems

You might think it’s a great problem to have, but it isn’t, and it is a big problem. Yesterday’s big Asian orders

add to the problem.

• Why is this a problem? Airbus’s backlog reflects the duopoly’s instability, which is awful.
• Why is it a big problem? The duopoly will only recover if Boeing fixes its production quality problems, satisfies the FAA, and accomplishes within short order(fat chance) or if Airbus fails.

We regularly refer to game theory when discussing the duopoly. It is crucial to understand that moves made by either OEM impact the other and force reactions. The current unstable duopoly is an aberration. The market will force Boeing to change; we hear more about this daily, as in this WSJ article yesterday. The entire commercial aviation silo desperately needs a stable duopoly.