2.17. Post-COVID-19 reopening. Much of the economic contrac- tion during the COVID-19 pandemic was due to public health rea- sons, not to direct economic reasons. In principle, once the health crisis is solved, the degree of economic activity can resume its previ- ous level. However, one may argue that there are coordination issues at stake. For simplicity, consider an economy with two firms. Each of the firms must decide whether to restart activity or not restart ac- tivity. If only one of the firms starts, then it will not have sufficient customers to break even. The reason is that some of the workers in the economy (those employed by the second firm) have no earnings to purchase goods from the first firm. The same reasoning applies to the other firm. Putting all of this information together, we may represent the game played by each of the two firms as in Figure 2.6. (a) Do any of the players have a dominant strategy in this game? (b) What would you expect the outcome of a game like this to be? (Note: this is an open question.)
2.17. Post-COVID-19 reopening. Much of the economic contrac- tion during the COVID-19 pandemic was due to public health rea- sons, not to direct economic reasons. In principle, once the health crisis is solved, the degree of economic activity can resume its previ- ous level. However, one may argue that there are coordination issues at stake. For simplicity, consider an economy with two firms. Each of the firms must decide whether to restart activity or not restart ac- tivity. If only one of the firms starts, then it will not have sufficient customers to break even. The reason is that some of the workers in the economy (those employed by the second firm) have no earnings to purchase goods from the first firm. The same reasoning applies to the other firm. Putting all of this information together, we may represent the game played by each of the two firms as in Figure 2.6. (a) Do any of the players have a dominant strategy in this game? (b) What would you expect the outcome of a game like this to be? (Note: this is an open question.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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provide explanations please for parts A and B. the table is provided below
Transcribed Image Text:2.17. Post-COVID-19 reopening. Much of the economic contrac-
tion during the COVID-19 pandemic was due to public health rea-
sons, not to direct economic reasons. In principle, once the health
crisis is solved, the degree of economic activity can resume its previ-
ous level. However, one may argue that there are coordination issues
at stake. For simplicity, consider an economy with two firms. Each
of the firms must decide whether to restart activity or not restart ac-
tivity. If only one of the firms starts, then it will not have sufficient
customers to break even. The reason is that some of the workers in
the economy (those employed by the second firm) have no earnings
to purchase goods from the first firm. The same reasoning applies
to the other firm. Putting all of this information together, we may
represent the game played by each of the two firms as in Figure 2.6.
(a) Do any of the players have a dominant strategy in this
game?
(b) What would you expect the outcome of a game like this to
be? (Note: this is an open question.)
Transcribed Image Text:2.4. A FORCE FOR THE GOOD
Firm 1
restart
not restart
250
0
restart
FIGURE 2.6
COVID-19 reopening game
Firm 2
250
-50
not restart
-50
0
0
0
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