6) Assume that Incom Fighter Systems is suing the New Republic for breach of contract. They have filed suit for 100 million galactic credits due to a cancelled X-Wing order. However, before the case goes to trial, the two parties can try and negotiate a settlement. The New Republic can make an offer, and then Incom can either accept the offer or press forward with the suit. (Assume there is just a single offer, and no counteroffers). Each side believes that Incom has a 70% chance of winning the lawsuit if it ends up in court. In addition, Incom would have to pay 15 million credits in lawyers fees, while the New Republic would pay 5 million if the case goes to trial. Draw the game, then solve it to

6) Assume that Incom Fighter Systems is suing the New Republic for breach of contract. They have filed suit for 100 million galactic credits due to a cancelled X-Wing order. However, before the case goes to trial, the two parties can try and negotiate a settlement. The New Republic can make an offer, and then Incom can either accept the offer or press forward with the suit. (Assume there is just a single offer, and no counteroffers). Each side believes that Incom has a 70% chance of winning the lawsuit if it ends up in court. In addition, Incom would have to pay 15 million credits in lawyers fees, while the New Republic would pay 5 million if the case goes to trial. Draw the game, then solve it to

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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17. In the following bargaining game, a firm (F) and a syndicate (S) have to share the benefits generated by their economic activity. Assume that the benefits are equal to 2 million euros. The game has three stages. Offers are alternating between F, S and F. In each stage, the player who has not offered how to share the benefits has the choice of accepting or rejecting the proposal made by the other player. If she accepts the proposal, the game ends and if she rejects, in the next stage, she will become the proposer. If the players do not reach any agreement, after the third proposal, both of them get a zero payoff. a) What will be agreement reached in equilibrium and in which time period will the agreement be reach if the discount factor of both players is & = 1/4? b) What will be agreement reached in equilibrium and in which time period will the agreement be reach if F has a discount factor 8p = 1/4 and S has 8s = 1/2? c) Compare the two agreements and try to provide an intuitive…
Problem 5 Two countries are currently facing the COVID threat when trading with each other. Such countries are currently considering three options: keeping the activities open, limiting the opening hours, or closing down. The following table shows the expected payoffs in billions of dollars. For example, if Country 1 will adopt “Limited opening" and Country 2 will keep the activities open, Country 1 will have a payoff of 4 billion dollars, while Country 2 will have a payoff of 8 billion dollars. Country 2 Оpen Limited opening Closed Оpen 5;5 8;4 10;0 Country 1 Limited opening 4;8 7;7 5;0 Closed 0;10 0;5 0;0 Question 5.1. In case of a simultaneous decision (simultaneous game), identify eventual equilibria, and strategies in this game for the two countries. Give a brief economic explanation of your results. Question 5.2. In case one of the two countries would choose first (sequential game), identify the two outcomes of the game, and eventual first/second mover advantages.
Question 2 Suppose there are two players, an entrant and an incumbent firm playing the following game: the entrant decides whether to stay out or enter. The incumbent decides whether to innovate or not. If the entrant stays out, the entrant firm gets a payoff of 0 whereas the incumbent firm gets a payoff od 1500, independent of the action of the incumbent firm. If the entrant enters and the incumbent doesn't innovate, the entrant gets 1200 whereas the incumbent gets 500. If the entrant enters and the incumbent innovates, the entrant and the incumbent get a payoff of 1000 each. a) Draw the normal form of the game and solve for the Nash equilibrium/equilibria. b) Suppose the game is dynamic: first the entrant decides whether to enter or stay out. If the entrant enters, the incumbent decides whether to innovate or not. If the entrant stays out, the incumbent doesn't get to play. Draw the extensive form of the fame, mark the subgames on paper and solve for the subgame-perfect Nash…
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Consider the following strategic interaction between two Australia telecommuncation companies deciding to set the prices of their ‘unlimited calls‘ mobile package.Try to explain the business reasons behind the relationships between the various payoffs. For example, why is Low the best response to the opponent playing High? Why is the payoff from (High,High) higher for both players than from (Medium, Medium)?
Match the definition to each term listed below. Number 1 2 3 4 5 6 7 8 9 10 11 Definition A table that shows the payoffs each firm earns from every combination of firm strategies An agreement among firms to charge the same price or otherwise not to compete An option that is better than any alternative option regardless of what the other firm does An outcome of a strategic game from which neither rival wants to deviate A game outcome in which players seek to increase their mutual payoff A practice where one firm initiates a price change and the other firms follow the leader A game in which the firms choose their strategies at the same time One firm's gain must equal the other firm's loss A game in which the sum of Firms select their optimal strategies in a single time period without regard to possible interactions in subsequent time periods A game that occurs more than once the two firms' outcomes is positive Instructions: Enter a numeric response corresponding to the number of the…
16-1. Two equal sized newspaper have an overlap in circulation of 10% (10% of the subscribers subscribe to both newspaper). Advertisers are willing to pay $10 to advertise in one newspaper but only $19 to advertise in both , because they’re are unwilling to pay twice to reach the same subscribers. What’s the likely bargaining negotiation outcome if the advertisers bargain by telling each newspaper that they’re going to reach an agreement with the other newspaper so the gains to reaching agreement are only $9? Suppose the two newspaper merge. What is the likely post merger bargaining outcome?
Consider a simple example of a payoff matrix in the context of a trade dispute between two countries, Country A and Country B. In this scenario, both countries can either choose to impose tariffs (T) or not impose tariffs (N) on each other's exports. The payoffs that each country experiences are based on the chosen strategies and are presented below. (a) Does Country A and B have a dominant strategy? If so, specify its dominant strategy and explain your answer clearly.(b) What is the Nash equilibrium. Explain your answer clearly.(c) Suppose now the trade dispute is played sequentially, with Country B moving first. Represent the trade dispute in and extensive form.(d) Is this trade dispute a prisoner's dilemma game? Explain your answer.
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15-3 Compatibility Microsoft and a smaller rival often have to select from one of two competing technologies. The rival always prefers to select the same technology as Microsoft (because compatibility is important), while Microsoft always wants to select a different technology from its rival. Describe the equilibrium of this game.
Question 1- Coordination Game There are two firms whose factories sit alongside a lake. It costs each firm $1,800 to install filters to avoid polluting the lake. Because both firms use the lake's water to produce goods, a polluted lake hurts their production process and increases their costs. Assume that the cost to each firm of a polluted lake is $1,200 times the number of polluting firms. a) Fill in the payoff matrix below based on the above information. Firm 1 Pollute Use Filter Pollute Firm 2 b) What is the pure strategy Nash Equilibrium of the game? Use Filter c) In the extensive form of the game, with Firm 1 choosing first, is the Nash Equilibrium different? Explain.