Barb and Sue are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all if they both advertise on TV, each will earn a profit of $5000. If they both advertise on radio, each will earn a profit of $7000.it neither advertises at all, each will earn a profit of $10 000. If one advertises on TV and the other advertises on radio, then the one advertising on TV will earn $8000 and the other will earn $3000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $15 000 and the other will earn $2000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $12 000 and the other will earn $4000. If both follow their dominant strategy, what will Barb do and what will she earn? Select one: a. not advertise and earn $10 000 O b. advertise on radio and earn $7000 Oc. advertise on TV and earn $15 000 d. advertise on TV and earn $5000 cross ou cross o

Barb and Sue are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all if they both advertise on TV, each will earn a profit of $5000. If they both advertise on radio, each will earn a profit of $7000.it neither advertises at all, each will earn a profit of $10 000. If one advertises on TV and the other advertises on radio, then the one advertising on TV will earn $8000 and the other will earn $3000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $15 000 and the other will earn $2000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $12 000 and the other will earn $4000. If both follow their dominant strategy, what will Barb do and what will she earn? Select one: a. not advertise and earn $10 000 O b. advertise on radio and earn $7000 Oc. advertise on TV and earn $15 000 d. advertise on TV and earn $5000 cross ou cross o

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

Two duopolists are sharing a market in which they are contemplating whether to compete or to cooperate. If they cooperate and behave like a monopolist they will share the monopolist profit of $1800. If they compete each will get a profit of $800 but if one them cooperates while the other chooses to compete the one who cooperates gets $700 while the one who competes will end up with $1000. Set-up the game, explain the process and show the Nash-equilibrium reached when the game is played.
Figure 11-5 Firm A Advertise Not Advertise Firm A 70 Firm A 30 Advertise Firm B 80 Firm B 150 Firm B Firm A 140 Firm A 90 Not Advertise Firm B 60 Firm B 100 Figure 11-5 shows the payoffs for two firms in a market that must decide whether or not to advertise. The dominant strategy is a) for Firm A to advertise but not Firm B. b) for neither firm to advertise. C) for both firms to advertise. d) for Firm B to advertise but not Firm A.
Cournot Duopoly: Suppose two firms produce identical products and they have identical constant production costs. When these two firms secretly agree to collude, these firms need to their output level and their price. If the collusion is successful, each firm earns of the monopoly profit. a. Cut; raise; half b. Cut; raise; one-third c. Raise; cut; half d. Raise; cut; one-third
Consider a market with two firms managed by Harry and Vera. Under a cartel (both firms pick the high price), each firm earns a profit of $85. Under a duopoly (both firms pick the low price), each firm earns a profit of $70. If the two firms pick different prices, the high-price firm earns a profit of $25 and the low-price firm earns a profit of $100. This is depicted in the payoff matrix to the right. The outcome of the pricing game is Vera High Price Low Price O A. Harry and Vera both pick the high price. O B. Harry picks the low price and Vera picks the high price. OC. Harry picks the high price and Vera picks the low price. O D. Harry and Vera both pick the low price. Наrry $85 $100 High Price $85 $25 $25 $70 The outcome identified above is a Nash equilibrium because neither firm has an incentive to Low Price $100 $70 O A. pick the high price given that the other player is picking the low price. O B. pick the high price given that the other player is picking the high price. O C.…
8. Two firms, the only firms in the market, sell the same product and have the same marginal cost. They realise they would be better off if they didn't compete with each other. They enter an alternating offers bargaining game to decide how they will divide the monopoly profit, n. They have three periods to come to an agreement. If no agreement is reached after three periods, the firms will compete simultaneously in prices. The firms toss a coin to decide who makes the first offer in the bargaining game. Firm 1 wins and decides to go first. Each firm has a discount factor o. a) Draw the game tree. b) What is the subgame perfect equilibrium when 8 = 0.5? c) What is the equilibrium payoff for each firm? d) Was Firm 1 wise to opt to make the first offer? Explain your answer. %3D
1. Consider a Cournot duopoly with the inverse demand P = 260 - 2Q. Two firms compete choosing their quantities. Both firms have constant. marginal and average cost MC = AC = 20. a. Find each firm's best response function. b. Find the Cournot equilibrium. c. Plot the best response curves and illustrate the equilibrium point.
Calculate the Herfindahl index for a duopoly market where each firm has equal market. Calculate the Herfindahl index for a three-firm oligopoly market in which one firm hasa 80% market share and the other firms each have 10% market share. iii. Calculate the Herfindahl index for a 10-firm oligopoly in which each firm has equal market shares. iv. Which of the above markets is the least competitive? Justify your position.
If firm 1 and firm 2 are the oligopolistic firms in bottled spring water production in Nomansland. The market demand is given by ? = 5000 −20?, Qd is the number of kilolitres demanded per month while P is the price of kilolitres of bottled water. The marginal cost of a kilolitre of bottled water is R10.How do I Find the Cournot equilibrium quantities and price? and how do I Find the Cournot profits and the monopolist profits?
Consider a market in which there are two firms: A and B. Each firm produces a differentiated product and chooses its price. Assume that each firm can set price equal to $60 or $70. The payoffs associated with each set of prices are shown. If the firms choose price simultaneously, then the Nash equilibrium price for firm A is chooses price first and can commit to that price, then firm A will set its price equal to If firm A ○ A. $70; $60 B. $70; $70 ○ C. $60; $70 ○ D. $60; $60 Q Firm B's Price ✓ $60 $70 $1800 $1650 $60 $1800 $2250 Firm A's Price $2250 $2200 $70 $1650 $2200
8. Two firms, the only firms in the market, sell the same product and have the same marginal cost. They realise they would be better off if they didn't compete with each other. They enter an alternating offers bargaining game to decide how they will divide the monopoly profit, n. They have three periods to come to an agreement. If no agreement is reached after three periods, the firms will compete simultaneously in prices. The firms toss a coin to decide who makes the first offer in the bargaining game. Firm 1 wins and decides to go first. Each firm has a discount factor o. a) Draw the game tree. b) What is the subgame perfect equilibrium when o = 0.5? c) What is the equilibrium payoff for each firm? d) Was Firm 1 wise to opt to make the first offer? Explain your answer.
The above figure shows the reaction functions for two pizza shops in a small isolated town. Identify the Cournot equilibrium point. What is the level of output that will be produced in collusion? What output will correspond to a perfect competitive outcome? Explain if Firm B producing 100 pizzas and firm A producing 50 pizzas will correspond to a Cournot equilibrium.
Choose the BEST answer. The graph below shows the collusion model of oligopoly. What level of output corresponds to the profit maximizing level of output for the two firms combined? P, MR, and MC at 1/20 B > combined Ⓒ%Q, where one firm maximize profits and splits the market. ⒸQ, where P-MC for the market as a whole. Quantity per month Othere is no efficient solution in the collusion model of oligopoly Q. where the two firms maximize total profit and split the market. MC D combined