Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1) Define Cartel and give an example.
2) Thelma and Louise are being charged for a murder/robbery. They are
separated by police and interrogated. They are given the choice to confess or
not to confess. The payoff matrix below identifies the years that they will each
spend in jail, for the various outcomes.
Louise
Confess
Don't Confess
Confess
(2
10,10
15.2
Thelma
Don't Confess
2,15
3,3
a. Identify the Dominant Strategy for either player, or state that there isn't one.
Remember, a "Strategy" is the players move. In this example, state "Confess" or
"Don't Confess" for each player, not the payoff.
b. Identify the Nash Equilibrium.

Transcribed Image Text:3) Amazon and Target both sell the new Xbox, and have a choice whether to
charge a high price or a low price. The payoff matrix identifies the profit either
store can expect to make (in millions of dollars).
Walmart
High Price
Low Price
b. Identify the Nash Equilibrium.
High Price
Search entries or author
3,6
Unread
5,5
Amazon
a. Identify the Dominant Strategy for either player, or write "none" if there isn't
one,
n
Low Price
2,8
4,3
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