Scenario: Payoff Matrix for Firms X and Y The following payoff matrix depicts the profits for the only two firms in this oligopolistic industry. In each cell, the 1st number is Firm X's profit and the 2nd number is Firm Y's Profit. Firm Y Low Price High Price Firm X Low Price $1600, $2500 $1800, $2800 High Price $1800, $2200 $2000, $2400 (Scenario: Payoff Matrix for Firms X and Y) In the scenario Payoff Matrix for Firms X and Y, what's the Nash Equilibrium for this game? X chooses Low Price and Y chooses Low Price, i.e L, L H, L Н, Н X chooses Low Price and Y chooses High Price, i.e L, H O None of these options is correct.

Scenario: Payoff Matrix for Firms X and Y The following payoff matrix depicts the profits for the only two firms in this oligopolistic industry. In each cell, the 1st number is Firm X's profit and the 2nd number is Firm Y's Profit. Firm Y Low Price High Price Firm X Low Price $1600, $2500 $1800, $2800 High Price $1800, $2200 $2000, $2400 (Scenario: Payoff Matrix for Firms X and Y) In the scenario Payoff Matrix for Firms X and Y, what's the Nash Equilibrium for this game? X chooses Low Price and Y chooses Low Price, i.e L, L H, L Н, Н X chooses Low Price and Y chooses High Price, i.e L, H O None of these options is correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The payoff matrix depicts potential payoffs in a non-sequential, non-repeating game. Blue numbers are for Player 1 and red numbers are for player 2. (This exact payoff matrix appears in 3 other questions on this exam.). The cooperative (collusive) equilibrium is: Player 1 (70,80) 0000 (30,20) (40,40) (10,90) Strategy C Strategy D Player 2 Strategy A 40, 40 10,90 Strategy B 30, 20 70, 80
part d
. OPEC, the Organization of Petroleum Exporting Countries, was founded in 1969. Their original objective was to form a cartel to increase the price that they receive for their oil exports. Create a prisoner’s dilemma type game for two large members of OPEC (e.g. Saudi Arabia and Indonesia). Create numbers, where payoffs are total annual oil export revenues for each of these two countries. Verbally explain how you got your numbers. Find the Nash equilibrium. Based on this model, what strategy is in the oil exporters’ best interest (Nash or otherwise)? How do they make it happen? Create another prisoner’s dilemmamodel for all of OPEC on one side, and all non OPEC oil exporting nations on the other side. Create numbers, where payoffs are total annual oil export revenues for each of the two sides. Verbally explain how you created your numbers. Also create your numbers applying the fact that OPEC’s total production capacity is greater than total non OPEC exports…
Refer to the normal-form game of price competition shown below. Introduce A Do Not Introduce B Clone Do Not Clone (5,5) (-10, 50) (500,0) Firm A must decide whether or not to introduce a new product. If firm A introduces a new product, firm B must decide whether or not to clone the product. The subgame perfect Nash equilibrium to this game is: Firm A plays "Do Not Introduce"; firm B plays "Clone" if firm A plays "Introduce." Firm A plays "Do Not Introduce"; firm B plays "Do Not Clone" if firm A plays "Introduce." Firm A plays "Introduce"; firm B plays "Clone" if firm A plays "Introduce." Firm A plays "Introduce"; firm B plays "Do Not Clone" if firm A plays "Introduce."
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Q17
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6)Game Theory: The Prisoners’ Dilemma: Assume that the Wilson and Spalding athletic equipment companies are in a one-shot game for market share and profits, but that they have the option of choosing only one of two possible price strategies for basketballs: $20 or $80. Obviously if they choose different strategies, the firm with the lower price will win the entire market. The firms face the following payoff matrix (See Chap. 10). Wilson\ \Spalding Wilson $ 20 Price Wilson $ 80 Price Spalding $ 20 Price $ 400, $ 400 $ 1500, $ 0 Spalding $ 80 Price $ 0, $ 1500 $ 1000, $ 1000 What strategy will each firm choose? Why? Which strategy is dominant? Which strategy is preferred by each firm? What will be the outcome of the one-shot game? Where is the Nash equilibrium? Which outcome would be best for the two firms? What will happen if the game is repeated an infinite number of times?
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