Firm A's additional profit when cheating: $Compare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when both firmscheat on the agreement. By how much would the profit of Firm A fall if both firms cheat on the agreement to collude?Round your answer to the nearest whole number.Firm A's lost profits when both cheat: $ The accompanying payoff matrix presents the profits for Firm A and Firm B under two pricing strategies.Firm A's strategyHigh priceLow priceFirm A Profit = $103Firm A Profit = $85High priceFirm B Profit = $85Firm B Profit = $39Firm B's strategyFirm A Profit = $77Firm A Profit = $39Low priceFirm B Profit = $103Firm B Profit = $77Suppose both firms have agreed to employ strategies that maximize their combined profits. How will the firms act?Firm A willFirm B willSet a high priceSet a high priceSet a low priceSet a low priceCompare the profits of Firm A when both firms respect the collusive agreement to the profits of Firm A when Firm Asecretly cheats on the agreement. How much additional profit would Firm A earn by secretly cheating on the agreement tocollude? Round your answer to the nearest whole number.

Combined profits:If Firm A and firm B chooses High price – then the combined profit is 85+85 = $170…

Answered: Firm A's additional profit when…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following game matrix with two players- Player 1 and Player 2 with their respective strategies. Which of the following statements is correct such as x>y>b>a Players Player2 Player 1 A B C D (Y, Y) (b, x) (x, a) (AE) is the one of many Nash equilibria (C) is the unique Nash equilibria (C. D) is the unique Nash equilibria (A. E) and (B. F) are two Nash equilibria E (a, b) (x, y) (y, a) F (a,x) (a, b) (b, b)
None
Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. 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 fryers. Warmbreeze Pricing High Low Flashfry Pricing High 11, 11 2, 15 Low 15, 2 8, 8 For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $15 million, and Warmbreeze will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfry and Warmbreeze are both profit-maximizing firms. If Flashfry prices high, Warmbreeze will make more profit if it chooses a price, and if Flashfry prices low, Warmbreeze will make more profit if it chooses a price. If Warmbreeze prices high, Flashfry will make more profit if it chooses a price, and if Warmbreeze prices low, Flashfry will make more profit if…
Note: the answer should be typed.
Suppose that there are only two firms in a market in which demand is given by p = 64 - Q, where Q is the total production of the two firms. Each firm can choose either a low level of output, qL = 15, or a high level of output, qH = 20. The unit cost of production for both firms is $4. Write down the normal-form representation of the game in which the strategic variable for each firm is the quantity of output and the firms make their choices simultaneously. Find the pure strategy Nash equilibrium of this game (quantities produced and market price).
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Two firms X and Y compete with each other. Firm X can produce one of three products X1, X2, or X3. Similarly, firm Y can produce one of three products Y1, Y1, and Y3. Each firm's profit depends on its own and its competitor's decision about which product to produce. These profits are given in the table below where each cell presents profits corresponding to a pair of chosen strategies with the first number being the profit of firm X and the second being the profit of firm Y. For example, if X chooses to produce X3 and Y chooses to produce Y1, the profit of X will be $15 and the profit of Y will be $20. The firms make their product choice decisions simultaneously and independently of each other. Y1 Y2 Y3 X1 0, 0 12, 8 16, 16 15, 20 18, 9 20, 15 8, 12 18, 18 9, 18 X2 X3 11) Does this game have any equilibrium in dominant strategies? If yes, find all of them. 12) In addition to the equilibria (if any) you found in the previous question, does this game have any other equilibria? If yes,…
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Imagine that there are two snowboard manufacturers (FatSki and WideBoard) in the market. Each firm can either produce ten or twenty snowboards per day. The table below (see attached) shows the profit per snowboard for each firm that will result given the joint production decisions of these two firms. Draw the game payoff matrix for this situation. Does either player have a dominant strategy? If so, what is it? What is the Nash equilibrium solution and how many boards should each player produce each day? Since FatSki and WideBoard must play this game repeatedly (i.e. make production decisions every day), what strategy would you advise them to play in order to maximize their payoff over the long term?

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