4. Consider the following Pricing game. Firms A and B each has two strategies: to charge Low or High price. The following table shows the payoffs for all possible outcomes: Firm B Pricing Strategy Low High Low Firm A 0,0 -200, 400 High 400, -200 100, 100 Suppose that Firms A and B are going to play this game over and over again, forever. Also, suppose both firms agree on the following collusive plan: "We will each charge the high price, provided neither of us has ever charged the low price in any previous period. If one of us cheats and charges the low price, the other player will charge the low price in every period thereafter." Answer the following questions about this infinitely repeated game:

4. Consider the following Pricing game. Firms A and B each has two strategies: to charge Low or High price. The following table shows the payoffs for all possible outcomes: Firm B Pricing Strategy Low High Low Firm A 0,0 -200, 400 High 400, -200 100, 100 Suppose that Firms A and B are going to play this game over and over again, forever. Also, suppose both firms agree on the following collusive plan: "We will each charge the high price, provided neither of us has ever charged the low price in any previous period. If one of us cheats and charges the low price, the other player will charge the low price in every period thereafter." Answer the following questions about this infinitely repeated game:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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For the game in FIGURE 7.6, derive players’ best-reply functions, plot them as shown in Figure 7.5, and find the Nash equilibrium.
First 4 blanks: high/low Last blank: is not/is
Consider the example at the beginning of the chap- ter. Suppose that there are only two blockbusters jockeying for position: Warner Bros.'s Harry Potter and Fox's Narnia. Suppose that blockbusters released in November share a total of $500 million in ticket revenues, whereas blockbusters released in Decembershare a total of $800 million(a) Formulate the game played by Warner Bros. and Fox.
◄ 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…
Answer part C and D
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E1
6. Using a payoff matrix to determine the equilibrium outcome Suppose that Zipride and Citron are the only two firms in a hypothetical market that produce and sell electric scooters. The following payoff matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for scooters. Zipride Pricing price. High Low For example, the lower-left cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $13 million, and Citron will earn a profit of $3 million. Assume this is a simultaneous game and that Zipride and Citron are both profit-maximizing firms. Citron Pricing High 9,9 13, 3 If Zipride prices high, Citron will make more profit if it chooses a Low If the firms do not lude, 3, 13 6, 6 If Citron prices high, Zipride will make more profit if it chooses a price. Considering all of the information given, pricing low True False Both Zipride and Citron will choose a low price. strategies…
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?
1. Consider the following game matrix. Player A Answer: Top Bottom Left a, b e, f Player B Right c, d g, h (a) If top and left are strictly dominant strategies, then what do we know the relationship of the parameters? (b) If (top, left) is a Nash equilibrium, then what do we know the relationship of the parameters? Answer: (c) If top and left are strictly dominant strategies, will (top, left) be a Nash equilibrium? Why? Answer: (d) If (top, left) is a Nash equilibrium, must the strategies be strictly dominant strategies? Why? Answer:
2. Consider the following game: Soapy Inc. and Suddies Inc. are the only producers of soap powder. They collude and agree to share the market equally. If neither firm cheats on the agreement, each makes $1 million profit. If either firm cheats, the cheat makes a profit of $1.5 million, while the complier incurs a loss of $0.5 million. If both cheat, they break even. Neither firm can monitor the other's actions. a) Construct the payoff matrix. b) What is the dominant strategy? c) What is the nash equilibrium for this game?
Q4. Suppose two firms (firm 1 and firm 2) sell differentiated products and compete by setting prices. Firms have a zero cost of production. The demand functions are q₁ = 1- P₁ + P₂ and q2 = 1-P₂ + P₁ What will be the price charged by each firm in a simultaneous-move game?