please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly Consider a market with two firms, Target and Wal-Mart, that sell CDs in their musicdepartment. Both stores must choose whether to charge a high price ($30) or alow price ($17) for the new Miley Cyrus CD.These price strategies with corresponding profits are depicted in the payoffmatrix. Target's profits are in red and Wal-Mart's are in blue.Target's dominant strategy is to pick a price of $CO2TargetPrice = $30Price = $17$7,000$1,000Price = $30$7,000$12,000Wal-Mart$12,000$4,000Price = $17$1,000$4,000

Detailed explanation:A dominiant strategy in a game is a strategy that always results in the same or…

Answered: Consider a market with two firms,…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 15P

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Consider a market with two firms, Target and Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ($30) or a low price (s13) for the new Miley Cyrus CD. These price strategies with corresponding profits are depicted in the payoff matrix to the right. Target's profits are in red and Wal-Mart's are in blue. Target Target's dominant strategy is to pick a price of S Price = $30 Price = $13 $7,000 $2.500 Price = $30 S7,000 $15,000 Wal - Mart $15.000 $5,000 Price = $13 $2,500 $5,000 Wal-Mart's dominant strategy is to pick a price of $ The new equilibrium market wage will be and the new equilibrium market employment level will be higher unchanged lower higher lower unchanged
Consider a market with two firms, Target and Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ($25) or a low price (513) for the new Miley Cyrus CD. These price strategies with corresponding profits are depicted in the payoff matrix. Target's profits are in red and Wal-Mart's are in blue. Target's dominant strategy is to pick a price of $ Wal-Mart's dominant strategy is to pick a price of $ What is the Nash equilibrium for this game? OA. The Nash equilibrium is for Target to choose a price of $25 and Wal-Mart to choose a price of $13. OB. The Nash equilibrium is for Target to choose a price of $13 and Wal-Mart to choose a price of $25. OC. The Nash equilibrium is for Target and Wal-Mart to both choose a price of $25. OD. The Nash equilibrium is for Target and Wal-Mart to both choose a price of $13. OE. A Nash equilibrium does not exist for this game. Price $25 Target Price = $25 Price $13 $9,000 $2,000 $9,000 $15,000 Wal-Mart…
Perrier and Apollinaris. Perrier and Apollinaris are two companies that sell mineral water in Tampa, FL. Each company has a fixed cost of $5,000 per period, regardless whether they sell anything or not. The two companies are competing for the same market and each firm must choose a high price ($2 per bottle) or a low price ($1 per bottle). Here are the rules of the game: At a price of $2, 5,000 bottles can be sold for total revenue of $10,000. At a price of $1, 10,000 bottles can be sold for total revenue of $10,000. If both companies charge the same price, they split the sales evenly between them. If one company charges a higher price, the company with the lower price sells the whole amount and the company with the higher price sells nothing. Payoffs are total profits. In this case, the NE is(are): (P=$2, P=$1). (P=$1, P=$2). (P=$2, P=$2). (P=$1, P=$1).
Perrier and Apollinaris. Perrier and Apollinaris are two companies that sell mineral water in Tampa, FL. Each company has a fixed cost of $5,000 per period, regardless whether they sell anything or not. The two companies are competing for the same market and each firm must choose a high price ($2 per bottle) or a low price ($1 per bottle). Here are the rules of the game: At a price of $2, 5,000 bottles can be sold for total revenue of $10,000. At a price of $1, 10,000 bottles can be sold for total revenue of $10,000. If both companies charge the same price, they split the sales evenly between them. If one company charges a higher price, the company with the lower price sells the whole amount and the company with the higher price sells nothing. Payoffs are total profits. In this case, Apollinaris has: no dominant strategy. Perrier has a dominant strategy of P=$1. a dominant strategy of P=$1. Perrier also has a dominant strategy of P=$2. a dominant strategy…
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
Consider two firms who compete with each other in terms of quantity. If the inverse market demand and total costs of the firms are given by P = 140 – Q TC, = 20q, + 10 TC2 = 20q1 + 10 a. Find the Response (Reaction) functions of each curve b. Find the Nash Equilibrium of this Cournot duopoly game c. Graphically represent this equilibrium using their Response (Reaction) curves d. Suppose these two firms collude and form a cartel, what will the equilibrium be under this situation e. Is the equilibrium under (d) sustainable or not and why? f. Suppose that both firms have agreed that firm 1 is a leader and firm 2 is a follower, find the Nash equilibrium of this sequential game
Revlon and L’Oreal cosmetics companies must choose between a high price and a low price for their makeup. Revlon’s annual profit (in millions of dollars) is listed in the payoff matrix below along with L’Oreal’s profits for each combination of strategies. What will be the outcome of this game? Does each player have a dominant strategy?
Alcoa and Kaiser, duopolists in the market for primary aluminum ingot, choose prices of their 500 foot rolls of sheet aluminum on the first day of the month. The following payoff table shows their monthly payoffs resulting from the pricing decisions they can make. Suppose Alcoa and Kaiser repeat their pricing decision on the first day of every month. Suppose they have been cooperating for the past few months, but now the manager at Kaiser is trying to decide whether to cheat or to continue cooperating. Kaiser’s manager believes Kaiser can get away with cheating for two months, but he also believes that Kaiser would be punished for the next two months after cheating. After punishment, Kaiser’s manager expects the two firms would return to cooperation. Kaiser’s manager ignores the time-value of money and does not discount future benefits or costs. 4. Suppose you were asked to manage a golf course that was currently charging a uniform price. Would you suggest that the course continue…
Consider the following version of the Stackelberg duopoly in which a long-term firm competes with several short-term firms. The short-term firms are only on the market for a period while the long-term firm remains on the market for the entire duration of the game. In each stage game t, first the short-term firm fixes an amount xt. Then, the long-term firm observes xt and chooses a quantity yt. Then, both firms sell their quantities at the price pt = 1-(xt + yt). All firms have marginal costs equal to 0. The short-run firm maximizes its profit, which occurs at every t. For its part, the long-term firm maximizes the present value of the flow of benefits with a discount rate = 0.99At the beginning of each stage game, previously decided actions are common knowledge. 1. What is the subgame perfect equilibrium if the game is played a finite number of periods T? 2. Now consider the infinitely repeated version of this game. Find the subgame perfect equilibrium where at = and Yt ½ in each…
Consider a market with two firms, Coke and Pepsi, that produce soft drinks. Both firms must choose whether to charge a high price ($1.25) or a low price ($0.65) for their soft drinks. These price strategies with corresponding profits are depicted in the payoff matrix to the right. Coke's profits are in red and Pepsi's are in blue. Coke's dominant strategy is to pick a price of dominant strategy is to pick a price of $ What is the Nash equilibrium for this game? A. Coke and Pepsi will both choose a price of $1.25. B. Coke will choose a price of $1.25 and Pepsi will choose a price of $0.65. and Pepsi's O C. Coke will choose a price of $0.65 and Pepsi will choose a price of $1.25. D. Coke and Pepsi will both choose a price of $0.65. Price = $1.25 Pepsi Price = $0.65 Price = $1.25 Price = $0.65 $800 Coke $900 $800 $175 $175 $700 $900 $700
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)
Two firms produce Bliffs. They compete by simultaneously choosing prices in a single period. The demand for Bliffs is given by P(Q) = 100-2Q where Q is market quantity and P is market price. Firm 1 has costs C1(q1) = 20q1 and Firm 2 has costs C2(q2) = 10q2. Which statement is true? In the Nash equilibrium to the game, both firms play dominated strategies None of the other answers are correct O In the Nash equilibrium to the game, both firms play dominant strategies In the Nash equilibrium to the game, both firms slowly lower prices towards marginal costs O In the Nash equilibrium to the game, both firms set price equal to marginal cost

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