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Consider the following game: Mercedes-Benz and Honda are the only two firms in the market for automobiles. Each firm has two strategies: produce high-grade vehicles or produce low-grade vehicles. The first entry in the bracket is the payoffs (in $billion) of Mercedes-Benz and the second entry is the payoffs of Honda. (see the image)
What is the dominant strategy of Mercedes-Benz and Honda? Also, what is the Nash equilibrium of this game?
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- Two firms, Snow Kings and Ski Express, at Denver International Airport have franchises to carry passengers to and from the mountains. These two firms compete through advertising. Their payoff matrix is below. Profits per customer are represented in the following format (Snow Kings, Ski Express Snow Kings Advertise Don't Advertise Advertise 25, 15 15, 20 Ski Express Don't Advertise 30,0 40,5 What combination of strategies achieves the Nash equilibrium in this game? a) 25,25 (Advertise, Advertise) b) 15,20 (Advertise, Advertise) c) 25,0 (Advertise, Don't Advertise) d) 40,5 (Advertise, Don't Advertise)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?We can see from the payoff matrix that there are no pure strategy Nash equilibrium in this game because at least one firm would always have an incentive to change its behavior. From Nash's theorem, we know there must be at least one Nash equilibrium so there must be a mixed strategy Nash equilibrium for this game. Find the mixed strategy Nash equilibrium by first deleting all dominated strategies in the game What's the expected payoff to Firm 2 in the equilibrium?
- aepioymentld=598281800483229979995799&elSBN=9780357133606&id%3D1061548135&snapshotld%32200166& 6. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smartphones: Flashfone and Pictech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones. Pictech Pricing High Low High 11, 11 2, 15 Flashfone Pricing Low 15, 2 8, 8 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $15 million, and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it chooses ▼ price. a If Pictech prices high, Flashfone will make more profit if it chooses a price, and…O Cell A O Cell C O Cell E O Cell I None of the aboveEconomics Consider an infinitely repeated game played between two firms with the following payoffs (firm 1 is listed first): · (250, 290) if both firms deviate · (290, 330) if both firms cooperate · (230, 370) if only firm 2 deviates · (350, 270) if only firm 1 deviates a. What probability-adjusted discount factor would ensure that Firm 1 would cooperate in a Nash equilibrium if Firm 2 applied a trigger strategy in the event that Firm 1 deviated? b. What probability-adjusted discount factor would ensure that Firm 2 would cooperate in a Nash equilibrium if Firm 1 applied a trigger strategy in the event that Firm 2 deviated?
- a. b. Each firm has four alternative strategies, and a certain profit/payoff is associated with each strategy. The numbers in the payoff matrix denote firm A's profit (in thousands of dollars). The total amount of profit that can be earned by the two firms together is $20000. (This is called a "constant sum game.") Firm B's profit is therefore $20000 minus firm A's profit. What strategies will the two firms select? Is the game strictly determined? If so, how much does each firm gain? B's strategies A's strategies ↓ Increase Advertising Decrease Price Increase Price Alter Product Increase Advertising 0 11 8 11 Decrease Price 8 10 6 2 Increase Price 7 12 15 Alter Product 4 15 3 12 Suppose now that due to a change in consumer preferences, firm A's "Increase Price" strategy pays off better than before when firm B elects to "Decrease Price," that is, the payoff rises from 6 to 14. What strategies will the two firms now select? Is the game strictly determined? If so, how much does each firm…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. Flashfry Pricing High Low 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. Warmbreeze Pricing High Low 9,9 2,15 15, 2 8,8 If Flashfry prices high, Warmbreeze will make more profit if it chooses a chooses a price. If Warmbreeze prices high, Flashfry will make more profit if it chooses a chooses a price. Considering all of the information given, pricing low True O False price, and if Flashfry prices low, Warmbreeze will make more profit if it price, and if Warmbreeze…Consider the following three-stage duopoly game. There are two firms in the market: Firm 1 and Firm 2. In the first stage, a first-price auction is conducted to determine the order of moves. The firm with the highest bid (first mover) pays a cost equivalent to its bid and chooses its action in the second stage. After observing this action, the other firm (second mover) chooses its action in the third stage. When there is a tie in the first stage (both firms submit the same bid), a coin is tossed to determine the winner, and only the winner pays its bid. Each firm has the following three possible actions: small (expansion), medium (expansion) and large (expansion), and the payoffs they obtain in the market (not the final payoffs yet) are shown below: The second mover Small Medium Large 16, 12 Medium 18, 8 19, 7 13, 10 14, 11 Small 9, 9 10, 13 12, 10 The first mover Large 14, 12 The final payoff is equivalent to the payoff obtained in the market minus the cost (if any) paid in auction.…
- 4. Using a payoff matrix to determine the equilibrium outcome 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. Flashfry Pricing High Low Warmbreeze Pricing High Low 11, 11 2,13 13, 2 10, 10 For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $13 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. price, and if Flashfry prices low, Warmbreeze will make more profit if it If Flashfry prices high, Warmbreeze will make more profit if it chooses a chooses a price. If Warmbreeze prices high, Flashfry will make more profit if it chooses a chooses a price. Considering all of the…Problem 5.1. The inverse market demand for printer paper is given by P = 400 – 2Q. There are two firms who compete to produce this paper, each with a marginal cost of production equal to c = 40 over a large range of output (ie, assume constant marginal cost). The two firms compete in quantities, in other words they each simultaneously choose a quantity to produce (Cournot competition). Derive the Cournot-Nash equilibrium of this game. Please write final answers in the boxes, showing work in blank areas. (a) The reaction function for each firm. 91 (92): 92 (91) (b) Optimal output q for each firm. 92 = р = = π1 = (c) Market price (from demand curve). (d) Firm profits. 92 = π2 =In a game of chicken, two drivers are heading towards each other on a collision course. The first one to swerve is considered the "chicken" and loses. What is the Nash equilibrium in this game? a) Both drivers swerve b) Neither driver swerves c) One driver swerves while the other doesn't d) It depends on the specific
