(Figure: Payoff Matrix for Red River and Yellow Sun) Use Figure: Payoff Matrix for Red River and Yellow Sun. The figure shows the potential profits of two producers of bottled water. Each has two strategies available to it: a high price and a low price. The Nash equilibrium is: Red River High price Low price High price Yellow Sun Yellow Sun's profit= $20,000 Red River's profit $20,000 Yellow Sun's profit $12,000 Red River's profit= $50,000 Low Price Yellow Sun's profit- $50,000 Red River's profit = -$2,000 Yellow Sun's profit- $10,000 Red River's profit= $10,000 O Red River charges a low price, Yellow Sun charges a low price. O Red River charges a high price, Yellow Sun charges a high price. O Red River charges a high price, Yellow Sun charges a low price. O Red River charges a low price, Yellow Sun charges a high price.

(Figure: Payoff Matrix for Red River and Yellow Sun) Use Figure: Payoff Matrix for Red River and Yellow Sun. The figure shows the potential profits of two producers of bottled water. Each has two strategies available to it: a high price and a low price. The Nash equilibrium is: Red River High price Low price High price Yellow Sun Yellow Sun's profit= $20,000 Red River's profit $20,000 Yellow Sun's profit $12,000 Red River's profit= $50,000 Low Price Yellow Sun's profit- $50,000 Red River's profit = -$2,000 Yellow Sun's profit- $10,000 Red River's profit= $10,000 O Red River charges a low price, Yellow Sun charges a low price. O Red River charges a high price, Yellow Sun charges a high price. O Red River charges a high price, Yellow Sun charges a low price. O Red River charges a low price, Yellow Sun charges a high price.

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

8) Consider the following game: There are 10 players. Each player is asked to write a number between 0 and 100. The player whose choice is closest to half of the average is the winner. Describe the game and discuss what would you expect to be the average number if the game were played in class with your colleagues. Do you expect them to play the Nash equilibrium strategy? Explain.
4. Consider the following Pricing game. Firms A and B each has two strategies: to charge Low or High price. The following table shows the payoffs for all possible outcomes: Firm B Pricing Strategy Low High Low Firm A 0,0 -200, 400 High 400, -200 100, 100 Suppose that Firms A and B are going to play this game over and over again, forever. Also, suppose both firms agree on the following collusive plan: "We will each charge the high price, provided neither of us has ever charged the low price in any previous period. If one of us cheats and charges the low price, the other player will charge the low price in every period thereafter." Answer the following questions about this infinitely repeated game:
COUNTRY B HIGH TARIFF LOW TARIFF HIGH TARIFF $1M $1 M $2M, $1.5 M COUNTRY A LOW $1.5 M, $ 2M $3м, $3 м TARIFF 1. What is the dominant strategy for: a. Country A b. Country B Is there an equilibrium dominant strategy for this game? 2. Find the Nash equilibrium a. Outcome = (High, high) b. Outcome = (High. Low) c. Outcome = (Low, high) d. Outcome = (Low, low) 3. What is the Maximin strategy for Country A and Country B? C.
6. Using a payoff matrix to determine the equilibrium outcome Suppose that Zipride and Citron are the only two firms in a hypothetical market that produce and sell electric scooters. 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 scooters. Zipride Pricing price. High Low For example, the lower-left cell shows that if Zipride prices low and Citron prices high, Zipride will earn a profit of $13 million, and Citron will earn a profit of $3 million. Assume this is a simultaneous game and that Zipride and Citron are both profit-maximizing firms. Citron Pricing High 9,9 13, 3 If Zipride prices high, Citron will make more profit if it chooses a Low If the firms do not lude, 3, 13 6, 6 If Citron prices high, Zipride will make more profit if it chooses a price. Considering all of the information given, pricing low True False Both Zipride and Citron will choose a low price. strategies…
1. What do we mean by market power in economics? What are some ways firms can attain market power? How can we, as economists, know when a firm has "too much" market power? Give an example of a firm you think has a lot of market power.2. Chapter 3 is all about game theory. Imagine you are in charge of pricing at a firm that has 20% market share in an industry where the leading firm has 50% market share. Imagine that the leader increases prices on their products. How do you think you would react? Why?
(The Beckhams' dilemma) Victoria and David are husband and wife. They both prefer ciean to dirty house but neither likes to clean the house. Their payoffs are given in the table below. Victoria Clean Don't clean 0,8 Clean 5,5 David Don't clean 8,0 1,1 a) Let say they play the clean house game only once, what is the Nash equilibrium? b) Let say Victoria and David has to decide whether to clean or not every day for indefinite number of days. How grim-trigger strategy will be our subgame perfect Nash equilibrium? In other words, what is the patience rate that ensure Victoria and David maintain the cleanliness of the house?
Player 1 Up Down [Select] Left 2,4 6,5 Player 2 In the above game, player 1 would play [Select] Right 1,0 4,2 , player 2 would play resulting in a Nash Equilibrium of [Select]
5
Problem 4 Consider the following two-person game Player 2 R 0,1 2, 3 Player 1 M 5, 9 7, 3 1, 7 5, 5 10, 10 1, 5 a) Find the dominant strategies for both players. b) Explain why (B, L) is not a Nash Equilibrium. c) Find the Nash equilibrium of the above game
(Figure: Payoff Matrix for the United States and Canada) Use Figure: Payoff Matrix for the United States and Canada. Suppose that the United States and Canada both produce quinoa, and each country can earn more profit it output is limited and the price of quinca is high. The dominant strategy for the United States is: Canada US Low output High output Low output EU profit $10 million US profit $10 million EU profit $4 million US profit $12 million High output EU profit $12 million US profit $4 million Olow output O The United States does not have a dominant strategy O adopt a fit for tal strategy O high output EU profit $7 million US profit $7 million
(Figure: Oligopoly Pricing Strategy in Wireless TV Market II) Use Figure: Oligopoly Pricing Strategy in Wireless TV Market II. The noncooperative equilibrium in the cable TV market occurs when: Next Wireless Supreme Wireless High price Low price High price Next Wireless earns $100,000 Supreme Wireless earns $100,000 Next Wireless earns $80,000 Supreme Wireless earns $130,000 Low price Next Wireless earns $130,000 Supreme Wireless earns $80,000 Next Wireless earns $90,000 Supreme Wireless earns $90,000 O Next Wireless sets a high price and earns $80,000, and Supreme Wireless sets a low price and earns $130,000. O both firms set a high price, and each earns $100,000. K O Next Wireless sets a low price and earns $130,000, and Supreme Wireless sets a high price and earns $80,000. O both firms set a low price, and each earns $90,000.
4