Consider a market with two firms, Target and Wal-Mart, that sell CDs in their music department. Both stores must choose whether tocharge 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 $25TargetPrice = $25 Price $13$9,000$2,000$9,000$15,000Wal-Mart$15,000$5,500Price $13$2,000$5,500G

Identify the Dominant Strategy for Target:If Wal-Mart chooses $25:Target's payoff if choosing $25:…

Answered: Consider a market with two firms,…

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

Hand written solutions are strictly prohibited
Two firms X and Y compete with each other. Firm X can produce one of three products X1, X2, or X3. Similarly, firm Y can produce one of three products Y1, Y1, and Y3. Each firm's profit depends on its own and its competitor's decision about which product to produce. These profits are given in the table below where each cell presents profits corresponding to a pair of chosen strategies with the first number being the profit of firm X and the second being the profit of firm Y. For example, if X chooses to produce X3 and Y chooses to produce Y1, the profit of X will be $15 and the profit of Y will be $20. The firms make their product choice decisions simultaneously and independently of each other. Y1 Y2 Y3 X1 0, 0 12, 8 16, 16 15, 20 18, 9 20, 15 8, 12 18, 18 9, 18 X2 X3 11) Does this game have any equilibrium in dominant strategies? If yes, find all of them. 12) In addition to the equilibria (if any) you found in the previous question, does this game have any other equilibria? If yes,…
Suppose that Snapface and Instashot are the only two firms in a hypothetical market that produce and sell polaroid cameras. 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 cameras. Snapface Pricing High Low For example, the lower-left cell shows that if Snapface prices low and Instashot prices high, Snapface will earn a profit of $18 million, and Instashot will earn a profit of $2 million. Assume this is a simultaneous game and that Snapface and Instashot are both profit-maximizing firms. Instashot Pricing High Low 11, 11 2, 18 18, 2 10, 10 If Snapface prices high, Instashot will make more profit if it chooses a high price, and if Snapface prices low, Instashot will make more profit if it chooses a price. If Instashot prices high, Snapface will make more profit if it chooses a chooses a ▼ price. Considering all of the information given, pricing high If the firms do not collude,…
Megan and Martha own competing hair salons that are in the same neighborhood. They are both considering offering their clients discounts in order to increase business. The payoff matrix shows their yearly incomes in thousands of dollars if they offer and do not offer discounts to their customers. Martha Megan Discount No Discount Discount $50, $75 $75, $60 No Discount $35, $90 $70, $85 If both Megan and Martha did not discount, what would each earn in yearly income? Megan would earn $50,000; Martha would earn $75,000. Megan would earn $75,000; Martha would earn $60,000. Megan would earn $35,000; Martha would earn $90,000. Megan would earn $70,000; Martha would earn $85,000. Megan would earn $35,000; Martha would earn $85,000.
O Cell A O Cell C O Cell E O Cell I None of the above
Consider a Stackelberg game of quantity competition between two firms. Firm 1 is the leader and firm 2 is the follower. Market demand is described by the inverse demand function P=1000-4Q. Each firm has a constant unit cost of production equal to 20. Suppose firm 2's unit cost of production is c<20. What value would c have so that in the Nash Equilibrium, the two firms, the leader and the follower, had the same market share?
Consider a Cournot competition game. The market demand function is: p = 4 – q1 – q2, where p is price and q is firm i's output level. Suppose that the firm's marginal cost of production is: C1 = 1, c2 = 0, respectively. A) Find the Nash equilibrium of the above game.
Two firms face the following payoff matrix shown to the right. Given these profits, Firm 2 wants to match Firm 1's price, but Firm 1 does not want to match Firm 2's price. Does either firm have a dominant strategy? Firm 1's dominant strategy Firm 2's dominant strategy and C Low Price Firm 2 High Price Low Price $8 $0 $0 $28 Firm 1 High Price $4 $24 $8 $24
On a duopolistic market, two tobacco firms are considering separately whether or not to engage in a marketing campaign. The market share gained from advertising will depend on whether the other competitor also advertises. The payoffs in millions of pounds for the firms are displayed in the following payoffs table where the first figure in the bracket denotes the payoff to A, and the second figure the payoff to B. Firm B\Firm A Firm A advertises Firm A no advertising Firm B advertises (60,75) (20,150) Firm B no advertising (120, 25) (100,120) a. Is there a dominant strategy? If so, what is the dominant strategy? Explain the meaning of a dominant strategy. b. Is there a Nash equilibrium? If so, what is it? Explain briefly what this implies. Explain the concept of Nash equilibrium. c. Does this advertising game pose a prisoners' dilemma? Justify your answer and explain what this means for the case of making advertising in cigarettes illegal.
A secluded off-ramp on a highway through the Prairie of Prax has two gas stations, the only gas stations for miles, Northgoings and Southgoings. Suppose Northgoings and Southgoings must simultaneously display their prices, choosing between a high price and low price gas. The payoff matrix for this game, showing potential daily profit, is displayed below. Assume both stations know all of the information in the matrix, and that this is a one-time payoff. Northgoings Decisions High Price Low Price N: $500 N: $800 High Price S: $400 S: $50 Southgoings Decisions N: $100 N: $250 Low Price S: $700 S: $200 (a) According to our model of game theory, Northgoings has a dominant strategy to [Select] (b) According to our model of game theory, Southlgoings has a dominant strategy to [ Select] V (c) According to our model of game theory, the competitive outcome, or Nash Equilibrium, Northgoings will earn [ Select] and Southgoings will earn [ Select] (d) On the other hand, if these two companies…
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…
To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn't Advertise Creamland Advertise 10, 10 18, 2 Doesn't Advertise 2, 18 11, 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $18 million, and Dairy King will make a profit of $2 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of _________ million if Dairy King advertises and a profit of ________ million if Dairy King does not advertise. If Creamland decides not to advertise, it will earn a profit of __________ million if Dairy King advertises and a profit of _________…

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS