Consider two competing firms, JR and OG. Suppose OG produces an estab- lished product and JR can either produce a clone or a differentiated product. If JR produces a clone, OG can either sue JR or not sue it. If JR produces a differentiated product rather than a clone, OG can either buy JR or not buy it. The two firms are in a non-cooperative game whose extensive form is rep- resented in the tree diagram below, where the payoffs on the right represent profits. -1 for OG 1 for JR sue OG don't sue -2 for OG clone 1 for JR JR don't clone 1 for OG -1 for JR buy OG don't buy 2 for OG 0 for JR If the two firms' managers are rational and recognize each other as rational, then (a) JR clones and OG sues (b) JR does not clone and OG buys (c) JR does not clone and OG does not buy (d) JR clones and OG does not sue (e) JR clones and OG sues with probability .5

Consider two competing firms, JR and OG. Suppose OG produces an estab- lished product and JR can either produce a clone or a differentiated product. If JR produces a clone, OG can either sue JR or not sue it. If JR produces a differentiated product rather than a clone, OG can either buy JR or not buy it. The two firms are in a non-cooperative game whose extensive form is rep- resented in the tree diagram below, where the payoffs on the right represent profits. -1 for OG 1 for JR sue OG don't sue -2 for OG clone 1 for JR JR don't clone 1 for OG -1 for JR buy OG don't buy 2 for OG 0 for JR If the two firms' managers are rational and recognize each other as rational, then (a) JR clones and OG sues (b) JR does not clone and OG buys (c) JR does not clone and OG does not buy (d) JR clones and OG does not sue (e) JR clones and OG sues with probability .5

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

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,…
Suppose we have two ice cream sellers, Blue Cool Ice Cream and Red Mango Ice Cream, deciding where to locate along a 1 kilometer long linear beach. Beachgoers are uniformly spread out everywhere along the beach. They do not like walking, and they view the ice cream from the two sellers as homogenous goods. Because of this, they will always buy from the nearest seller. The sellers cannot choose their price, only the location. A strategy for a player in this game is a distance between 0m and 1000m, which represents where the player will locate. For example, a distance of 0m is a strategy. The payoffs are the percentages of the market that each seller captures (depending on their two strategies). For example, if Blue Cool chooses 0m and Red Mango chooses 1000m, their payoffs are 50% and 50%. If the two sellers locate at exactly the same spot, they share the market and get 50% each. Suppose each player can only choose from 5 locations: 0m, 250m, 500m, 750m, 1000m. Is playing 0m is a…
4
O Cell A O Cell C O Cell E O Cell I None of the above
First 4 blanks: high/low Last blank: is not/is
Answer part C and D
2
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…
Problem 5.1. The inverse market demand for printer paper is given by P = 400 – 2Q. There are two firms who compete to produce this paper, each with a marginal cost of production equal to c = 40 over a large range of output (ie, assume constant marginal cost). The two firms compete in quantities, in other words they each simultaneously choose a quantity to produce (Cournot competition). Derive the Cournot-Nash equilibrium of this game. Please write final answers in the boxes, showing work in blank areas. (a) The reaction function for each firm. 91 (92): 92 (91) (b) Optimal output q for each firm. 92 = р = = π1 = (c) Market price (from demand curve). (d) Firm profits. 92 = π2 =
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?
Speedy Bike's Advertising Power Bike's Advertising Budget Large Budget Small Large Small A $20 B $18 $20 с $35 $18 $35 D $25 $25 Refer to the payoff matrix. Suppose that Speedy Bike and Power Bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. If this is a one-time, simultaneous game, which cell represents the final outcome we would expect to occur?
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?