2. Consider a duopoly with firms selling identical goods. Firms are assumed to face a linear demand function, identical constant marginal costs and zero fixed costs. a. Assume decisions are taken in a two stage game. In stage 1, Firm A chooses quantity, in stage 2, Firm B chooses quantity. Use graphical analysis and economic intuition to obtain the Subgame Perfect Nash Equilibrium Strategies. b. What would happen in a) if you add a stage 3 to the above game where firm A can change its quantity? [ c. Assume now that firms choose prices. Firm A chooses price in stage 1 and Firm B chooses price in stage 2. Use graphical analysis and economic intuition to explain the price consumers will pay

2. Consider a duopoly with firms selling identical goods. Firms are assumed to face a linear demand function, identical constant marginal costs and zero fixed costs. a. Assume decisions are taken in a two stage game. In stage 1, Firm A chooses quantity, in stage 2, Firm B chooses quantity. Use graphical analysis and economic intuition to obtain the Subgame Perfect Nash Equilibrium Strategies. b. What would happen in a) if you add a stage 3 to the above game where firm A can change its quantity? [ c. Assume now that firms choose prices. Firm A chooses price in stage 1 and Firm B chooses price in stage 2. Use graphical analysis and economic intuition to explain the price consumers will pay

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

1. Consider the following game in strategic or normal form. A2 B2 C2 A1 1,0 | 1,2 -2,1 B1 6,2 0,3 2,3 c1 2,2 -2,1| 2,3 a. Use the iterative elimination of strictly dominated strategies to reduce the game as much as possible. b. What is the set of rationalizable strategies for each player? c. What is/are Nash equilibrium(s) in this game? d. Explain the differences between cooperative and non- cooperative games. What are the fundamental hypotheses about the behavior of the persons in Game theory?
Normal Form Game: The table below provides a normal form, 2 x 2 game. The players are Column and Row. Column can choose either LEFT or RIGHT, and Row can choose either UP or DOWN. Their payoffs for each combination of moves are provided in the four boxes. Column Row UP DOWN The combination of moves (UP, LEFT) is a Nash-Equilibrium. A. False O B. True 2 LEFT -1 -7 3 6 RIGHT -5 -10
Consider the game in the table below. Find the Nash Equilibrium of the game. Add the payoffs of both players at the Nash Equilibrum and enter that number. Firm A Left Right Up Firm B 9,11 5,6 own 5,10 6,5 20
The payoff matrix in the figure to the right shows the payoffs for a pricing game. If you were firm A, which strategy would you choose? Firm A should A. price high because this is their maximin strategy. B. price low because this is their tit-for-tat strategy. C. price high because this is their dominant strategy. D. price low because this is their dominant strategy. E. price low because this maximizes profits of both firms. Firm B's dominant strategy is to price If this game were repeated a large number of times and you were firm A and you could change your strategy, what might you do? Firm A should O A. use a tit-for-tat strategy by responding in kind to firm B's play. B. use a maximin strategy by maximizing the minimum gain that can be earned. C. use a tit-for-tat strategy by selecting a price that minimizes firm B's profits. D. use a maximin strategy by by responding in kind to firm B's play. E. use a tit-for-tat strategy by maximizing the minimum gain that can be earned. C Price…
12. An important characteristic of a dominant strategy is that: Select one: a. it is the best strategy to dominate your opponents b. it always leads to a Nash equilibrium where all players equally well off c. it can prevent the game reaching a Nash equilibrium d. it is the best strategy for a player, regardless of whatever strategy the opponent chooses
9. Little Kona is a small coffee company that is consider- ing entering a market dominated by Big Brew. Each company's profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price: Little Kona Enter Don't Enter High Price Kona makes $2 million Kona makes zero Big Brew Brew makes $3 million Brew makes $7 million Kona loses $1 million Low Price Kona makes zero Brew makes $1 million Brew makes $2 million
◄ Search 12:47 PM Sun Nov 12 ← Note Nov 12, 2023 Uptown's price strategy The Nash equilibrium occurs when High Low LED RareAir's price strategy High $12 $15 The more favorable outcome would be for $12 Tt ✪ $6 B Low $6 D $8. $15 $8 S O both firms have an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the dominant strategy of cell A. 92% neither firm has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the dominant strategy of cell D. O one firm consistently has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the high-price strategy of cell B. O one firm consistently has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the high-price strategy of cell C. O the firms to collude and use the high-price strategy but this strategy requires cooperation. O one firm to take the lead and let the…
The following payoff matrix shows the possible sentence that two suspects , who are arrested on suspicion on car threft,could recieve. The suspects are intarogated seperately and are unable to communicate with one another. For the information given in the payoff matrix above: a. Is there a dominant strategy. b. What is the dominant strategy? How do you know? c. Is there a Nash equilibirium ? How do you know?
2. Consider the following game. Assume that this game is played simultaneously and without collusion. The two companies are choosing between two strategies: go international or stay national. The outcomes of each strategy for each company are given the following payoff matrix: a) Find Nash equilibrium in this game. Interpret the equilibrium you found. b) What is the Chipco's dominant strategy, if it has one? How shall Chipco's payoffs change for it to not have a dominant strategy anymore?
on Mary, UE, BD UF, AC DF, BC UF, BD DE, AC DE, BC Nancy U D Nancy -5,4 Mary -0,2 -6,2 -2.6 Which of the following answers is a subgame perfect Nash equilibrium in this game? Check all that apply. (Answers below are formatted as Mary's strategy, Nancy's strategy.)
Q) Let x and y be real numbers and consider the game in Table 1. Using the concepts of dominance, best response and rationalizability, for which values of x and y is this game dominance solvable? Make sure to clearly explain the concepts used, and your reasoning. Hint: There are two possible cases which do not involve the same NE. i attached image. solve it early i upvote definetly
Mr Bond and Mrs Bond each pick an integer between 1 and 5 (inclusive). They make their choices simultaneously. If they pick the same number each receives a payoff equal to the number they named. If they pick a different number, they get nothing. a.To choose the same number is a dominant strategy b.There are 5 Nash equilibrium in pure strategies c.The equilibrium is in dominant strategies d.All responses are correct