Firm 2 Low Price Low Price 2 Firm 1 0 High Price 7 1 2 High Price 0 6 a. Does either firm have a dominant strategy? Does this game have a unique, pure-strategy Nash equilibrium? Identify all pure and mixed-strategy Nash equilibria. b. How would your answers change if Firm 1 gets 5 instead of 7 when it chooses a low price and Firm 2 chooses a high price? 6

Firm 2 Low Price Low Price 2 Firm 1 0 High Price 7 1 2 High Price 0 6 a. Does either firm have a dominant strategy? Does this game have a unique, pure-strategy Nash equilibrium? Identify all pure and mixed-strategy Nash equilibria. b. How would your answers change if Firm 1 gets 5 instead of 7 when it chooses a low price and Firm 2 chooses a high price? 6

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5PA

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