Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($500) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the payoff matrix to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350, then Dell will match that price and also charge $350. What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? (Enter either positive or negative numeric HP's profit will change by $ and Dell's profit will change by responses using integers.) Price = $500 Dell Price $350 Price $500 Price $350 $80 $15 $100 $80 $15 $50 $100 $50

Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($500) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the payoff matrix to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350, then Dell will match that price and also charge $350. What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? (Enter either positive or negative numeric HP's profit will change by $ and Dell's profit will change by responses using integers.) Price = $500 Dell Price $350 Price $500 Price $350 $80 $15 $100 $80 $15 $50 $100 $50

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.5P

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Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($400) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the bavoli matris to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350, then Dell will match that price and also charge $350. What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? Assuming HP and Dell can coordinate to maximize profits, HP's profit will change by $ and Dell's profit will change by (Enter either positive or negative numeric responses using integers.) Price $400 Dell Price $350 HP Price = $400 Price $350 $80 $90 $80 $20 $20 $50 $90 $50 G
O Cell A O Cell C O Cell E O Cell I None of the above
Intel and AMD are the two dominant producers of microchip processors. The following matrix gives the payoffs (in millions of dollars) of the two firms for different combinations of their pricing strategies. The first number is Intel's payoff and the second AMD's. AMD Intel Low Price High Price Low Price 35, 30 30, 60 High Price 70,25 65,55 O If this game is played sequentially, the Nash equilibrium will not change irrespective of who moves first. If this one-shot game is repeated for 10 times, the Nash equilibrium is for both firms to choose High Price. O In this game, Pareto criterion leads both firms to choose High Price. This game is an example of coordination game.
Imagine that there are two snowboard manufacturers (FatSki and WideBoard) in the market. Each firm can either produce ten or twenty snowboards per day. The table below (see attached) shows the profit per snowboard for each firm that will result given the joint production decisions of these two firms. Draw the game payoff matrix for this situation. Does either player have a dominant strategy? If so, what is it? What is the Nash equilibrium solution and how many boards should each player produce each day? Since FatSki and WideBoard must play this game repeatedly (i.e. make production decisions every day), what strategy would you advise them to play in order to maximize their payoff over the long term?
Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. Kellogg What is the cooperative equilibrium for this game? $4.00 Price = $2.50 Price = O A. The cooperative equilibrium is for Kellogg to choose a price of $2.50 and $800 $50 Post to choose a price of $4.00. Price = $4.00 $800 %3D OB. The cooperative equilibrium is for Kellogg and Post to both choose a price 006$ of $2.50. Post C. The cooperative equilibrium is for Kellogg and Post to both choose a price of $4.00. Price = $2.50 $350 OD. The cooperative equilibrium is for Kellogg to choose a price of $4.00 and Post to choose a price of $2.50. %3D $50 $350 OE. A cooperative equilibrium does not exist for this game. Is the cooperative equilibrium likely…
Consider the following game: Mercedes-Benz and Honda are the only two firms in the market for automobiles. Each firm has two strategies: produce high-grade vehicles or produce low-grade vehicles. The first entry in the bracket is the payoffs (in $billion) of Mercedes-Benz and the second entry is the payoffs of Honda. (see the image) What is the dominant strategy of Mercedes-Benz and Honda? Also, what is the Nash equilibrium of this game?
Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. Kellogg What is the cooperative equilibrium for this game? Price = $4.00 Price = $2.50 O A. The cooperative equilibrium is for Kellogg to choose a price of $2.50 and Post to choose a price of $4.00. $800 Price = $4.00 $50 %3D O B. The cooperative equilibrium is for Kellogg and Post to both choose a price of $2.50. Post of $4.00. OC. The cooperative equilibrium is for Kellogg and Post to both choose a price $350 O D. The cooperative equilibrium is for Kellogg to choose a price of $4.00 and $350 Price = $2.50 $50 Post to choose a price of $2.50. O E. A cooperative equilibrium does not exist for this game. Clear all Chec 88,092 2 47
Two firms must simultaneously decide whether to enter a market. The payoffs resulting from their decisions are illustrated in the figure to the right. Determine the mixed-strategy Nash equilibrium for this game. The mixed-strategy Nash equilibrium is for Firm 1 to not enter with probability 0₁ = probability 0₂ =. (Enter your responses rounded to two decimal places.) and for Firm 2 to not enter with Don't enter Firm 2 Enter Don't enter 0 4 0 Firm 1 0 Enter 0 -4 2 - 2
Suppose that two players are playing the following game. Player 1 can choose either Top or Bottom, and Player 2 can choose either Left or Right. The payoffs are given in the following table: where the number on the left is the payoff to Player A, and the number on the right is the payoff to Player B. The Nash Equilibrium in pure strategies in this game is Player A O Top/Left O Top/Right Top Bottom Bottom/Left Bottom/Right None of these Left 4 3 Player B 2 0 Right 3 2
Consider the following simultaneous-move game that represents the payoffs from different advertising campaigns (low, medium, and high spending) for two political candidates that are running for a particular office. The values in the payoff matrix represent the share of the popular vote earned by each candidate is given below. The equilibrium in dominant strategies Candidate A-low Candidate A-medium Candidate A-high Ois (low. low). O is (medium, medium). O is (high, high). O is (medium, high) O does not exist. Candidate B-low Candidate B-medium Candidate B-high 50, 50 60,40 80, 20 40, 60 50, 50 65, 35 20, 80 35,65 50, 50
Suppose two firms (A and B) are competing in price. Each firm can charge either High or Low price and the payoffs (profit or loss) from these strategies are presented below: Firm B High 50, -40 10, 10 Low Firm A Low 0,0 High -40, 50 a. Find all pure strategy Nash equilibria b. If this game is played ten times by these two firms, find all pure strategy Nash equilibria c. Suppose this game is played infinitely and these firms agreed to charge high price in order to earn profits of Gh10 each but a firm will charge low price if its rival cheats. Find the a discount rate that will cause a firm to cheat d. Suppose the discount rate is 40% will the collusion strategies constitute a Nash Equilibrium
Consider the following entry game: Here, firm B is an existing firm in the market, and firm A is a potential entrant. Firm A must decide whether to enter the market (play "enter") or stay out of the market (play "not enter"). If firm A decides to enter the market, firm B must decide whether to engage in a price war (play "hard"), or not (play "soft"). By playing "hard," firm B ensures that firm A makes a loss of $2 million, but firm B only makes $2 million in profits. On the other hand, if firm B plays "soft," the new entrant takes half of the market, and each firm earns profits of $4 million. If firm A stays out, it earns zero while firm B earns $8 million. Which of the following are Nash equilibrium strategies? (not enter, hard) and (enter, soft) (enter, soft) and (not enter, soft) (enter, hard) and (not enter, soft) (enter, hard) and (not enter, hard)