Consider two firms that are choosing the price of competing products. The choices are contained in the payoff table. Each firm can raise price, lower price, or maintain their price. Suppose the game is played once each period forever. If both players play the strategy "always lower price" is this a Nash equilibrium? Let b = discount rate, 0 < b<1. Raise price Maintain price Lower price Firm B |Raise price Maintain price Lower price 6. 4 8. 8 1. 1 5, 5 4, 6 2, 7 7.2 1. 1 _3, 3 Firm A O No, because it is dominated by raising the price. O No, because it is dominated by both firms raising the price. O No, because it is dominated by maintaining the price. Yes.

Consider two firms that are choosing the price of competing products. The choices are contained in the payoff table. Each firm can raise price, lower price, or maintain their price. Suppose the game is played once each period forever. If both players play the strategy "always lower price" is this a Nash equilibrium? Let b = discount rate, 0 < b<1. Raise price Maintain price Lower price Firm B |Raise price Maintain price Lower price 6. 4 8. 8 1. 1 5, 5 4, 6 2, 7 7.2 1. 1 _3, 3 Firm A O No, because it is dominated by raising the price. O No, because it is dominated by both firms raising the price. O No, because it is dominated by maintaining the price. Yes.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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