Consider the following the pricing game in which Greyhound and Trailways simultaneously choose the price of a seat on their buses from Philly to Allentown. Their choices are: Greyhound: $10, $20, or $50 Trailways: $30 or $40 Assume there are 100 customers who will split evenly between the bus lines if the prices are within $10 of each other. If the prices are more than $10 apart, then 70 customers will take the cheaper seats and 30 will take the more expensive seats. Write down the payoff matrix for this game. Remember, payoff revenue= (price per seat)x(number of customers)

Consider the following the pricing game in which Greyhound and Trailways simultaneously choose the price of a seat on their buses from Philly to Allentown. Their choices are: Greyhound: $10, $20, or $50 Trailways: $30 or $40 Assume there are 100 customers who will split evenly between the bus lines if the prices are within $10 of each other. If the prices are more than $10 apart, then 70 customers will take the cheaper seats and 30 will take the more expensive seats. Write down the payoff matrix for this game. Remember, payoff revenue= (price per seat)x(number of customers)

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

O Cell A O Cell C O Cell E O Cell I None of the above
a. b. Each firm has four alternative strategies, and a certain profit/payoff is associated with each strategy. The numbers in the payoff matrix denote firm A's profit (in thousands of dollars). The total amount of profit that can be earned by the two firms together is $20000. (This is called a "constant sum game.") Firm B's profit is therefore $20000 minus firm A's profit. What strategies will the two firms select? Is the game strictly determined? If so, how much does each firm gain? B's strategies A's strategies ↓ Increase Advertising Decrease Price Increase Price Alter Product Increase Advertising 0 11 8 11 Decrease Price 8 10 6 2 Increase Price 7 12 15 Alter Product 4 15 3 12 Suppose now that due to a change in consumer preferences, firm A's "Increase Price" strategy pays off better than before when firm B elects to "Decrease Price," that is, the payoff rises from 6 to 14. What strategies will the two firms now select? Is the game strictly determined? If so, how much does each firm…
Consider the example at the beginning of the chap- ter. Suppose that there are only two blockbusters jockeying for position: Warner Bros.'s Harry Potter and Fox's Narnia. Suppose that blockbusters released in November share a total of $500 million in ticket revenues, whereas blockbusters released in Decembershare a total of $800 million(a) Formulate the game played by Warner Bros. and Fox.
The inverse market demand for fax paper is given by P=100-Q. There are two firms who produce fax paper. Firm 1 has a cost of production of C1= 15*Q1 and firm 2 has a cost of production of C2=20*Q2 a) Suppose that firm play a Stackelberg game. First firm 1 sets the quantity in t=1, then, knowing which quantityfirm 1 has set, firm 2 chooses the quantity in t=2. What are the Stackelberg quantities and prices? What arethe profits od firm 1 and 2? Compared to part a) which firm benefits and which firm loses?
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 _________…
part ii-viii
Q4. Suppose two firms (firm 1 and firm 2) sell differentiated products and compete by setting prices. Firms have a zero cost of production. The demand functions are q₁ = 1- P₁ + P₂ and q2 = 1-P₂ + P₁ What will be the price charged by each firm in a simultaneous-move game?