2. Apex and Brilliant select prices to maximize their individual profits. The profits are listed in the table below. Apex \ Brilliant Low High (7,0) (4, 4) Low (1, 1) (0, 7) High (i) Find all Nash equilibria of the game. (ii) Now suppose that Apex and Brilliant play the game in (i) an infinite number of periods. The firms discount future payoffs at the rate Sper period, where 0 < 8< 1. Is there a subgame-perfect Nash equilibrium in which both firms select High each period? (iii) Suppose that firms' discount factors change so they are unequal and satisfy 0 < &i < & < 1. Is there a subgame-perfect Nash equilibrium in which both firms select High each period?

2. Apex and Brilliant select prices to maximize their individual profits. The profits are listed in the table below. Apex \ Brilliant Low High (7,0) (4, 4) Low (1, 1) (0, 7) High (i) Find all Nash equilibria of the game. (ii) Now suppose that Apex and Brilliant play the game in (i) an infinite number of periods. The firms discount future payoffs at the rate Sper period, where 0 < 8< 1. Is there a subgame-perfect Nash equilibrium in which both firms select High each period? (iii) Suppose that firms' discount factors change so they are unequal and satisfy 0 < &i < & < 1. Is there a subgame-perfect Nash equilibrium in which both firms select High each period?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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