abTOGETHEDFigure 4DLFdildeParagraphLowprice414. In an oligopoly, the ideal pricing strategy is for all firms to charge the high price. Due tothe structure of oligopoly markets, charging the low price is considered cheating, whenthere is more than one pricing-period expected, because competitors are likely to be shutout of the market in the short run. Assume that Dr. Fine and Dr. Feelgood are the onlytwo medical doctors offering immediate walk-in medical services in a small rural town.Therefore, they operate in a two-firm oligopoly. Each doctor can charge either a highprice or a low price for a standard medical visit. Figure 4 shows the possible profits forDr. Fine and Dr. Feelgood, based on each doctor's pricing strategy.HighpriceDr FeelgoodLow price$35 profit$35 profitTT Normal 1 No Spaci... Heading 1 Heading 2IT$45 profit$0 profitHigh price$0 profit$45 profit1$38 profit$38 profit244Il TitlePENGELStyles1 above explain why the Nash EquilibriumAUD AaBb CcD AaBb CcDEmphasisIT Subtitle Subtle Em...A abChangeStyles -ReplaceSelect -Editing libliFineParagraphEnterresponsehere.EnterFeelgood responsehere.FIRSTPeriodCharges(high or low)b. Using the information in Question 4 and Figure 4 above, complete the following table todepict the two-period pricing situation when Dr. Fine always plays "tit-for-tat" and Dr.Feelgood always plays "tit-for-tat."FIRSTPeriodPayoffsEnterresponsehere.EnterNormal I No Spaci... T Heading 1 T Heading 2responsehere.SECONDPeriodCharges(high orlow)Enterresponsehere.Enterresponsehere.SECONDPeriodPayoffsEnterresponsehere.Enterresponsehere.TOTALPayoffsEnterresponsehere.EnterT Titleresponsehere.Stylesc. Using the information in Question 4 and Figure 4 above, complete the following table toSit for at and DrT SubtitleAdBbCcD! AaBbCSubtle Em... Empha

Nash equilibrium is the equilibrium in game theory where no player wants to deviate. Given pay-off…

In an oligopoly, the ideal pricing strategy is for all firms to charge the high price. Due to the structure of oligopoly markets, charging the low price is considered cheating, when there is more than one pricing-period expected, because competitors are likely to be shut out of the market in the short run. Assume that Dr. Fine and Dr. Feelgood are the only two medical doctors offering immediate walk-in medical services in a small rural town. Therefore, they operate in a two-firm oligopoly. Each doctor can charge either a high price or a low price for a standard medical visit. Figure 4 shows the possible profits for Dr. Fine and Dr. Feelgood, based on each doctor's pricing strategy.

In an oligopoly, the ideal pricing strategy is for all firms to charge the high price. Due to the structure of oligopoly markets, charging the low price is considered cheating, when there is more than one pricing-period expected, because competitors are likely to be shut out of the market in the short run. Assume that Dr. Fine and Dr. Feelgood are the only two medical doctors offering immediate walk-in medical services in a small rural town. Therefore, they operate in a two-firm oligopoly. Each doctor can charge either a high price or a low price for a standard medical visit. Figure 4 shows the possible profits for Dr. Fine and Dr. Feelgood, based on each doctor's pricing strategy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please help with these two: 1. Consider a Duopoly model, in which two firms decide a quantity simultaneously. If they collude (setting the total quantity together), then each firm can earn (higher, or lower) profit than in the Cournot equilibrium. 2. Consider a collusion with two firms. The joint profit is maximized by setting quantity and price together. Each firm sells the agreed amount. However, believing that the other firm sells the agreed amount, there is always a temptation for the firm sell (more, or less) than the agreed amount.
On a duopolistic market, two tobacco firms are considering separately whether or not to engage in a marketing campaign. The market share gained from advertising will depend on whether the other competitor also advertises. The payoffs in millions of pounds for the firms are displayed in the following payoffs table where the first figure in the bracket denotes the payoff to A, and the second figure the payoff to B. Firm B\Firm A Firm A advertises Firm A no advertising Firm B advertises (60,75) (20,150) Firm B no advertising (120, 25) (100,120) a. Is there a dominant strategy? If so, what is the dominant strategy? Explain the meaning of a dominant strategy. b. Is there a Nash equilibrium? If so, what is it? Explain briefly what this implies. Explain the concept of Nash equilibrium. c. Does this advertising game pose a prisoners' dilemma? Justify your answer and explain what this means for the case of making advertising in cigarettes illegal.
Synergy and Dynaco are the only two firms in a specific high-tech industry. They face the following payoff matrix as they decide upon the size of their research budget: Dynaco's Decision Synergy's Decision Large Budget Large Budget $30 million, $20 million Small Budget $0, $30 million If Synergy believes Dynaco will go with a large budget, it will choose a budget. If Synergy believes Dynaco will go with a small budget, it will choose a budget. Therefore, Synergy a dominant strategy. O True Small Budget $70 million, $0 $50 million, $40 million If Dynaco believes Synergy will go with a large budget, it will choose a budget. If Dynaco believes Synergy will go with a small budget, it will choose a budget. Therefore, Dynaco a dominant strategy. O False True or False: There is a Nash equilibrium for this scenario. (Hint: Look closely at the definition of Nash equilibrium.)
Suppose two firms compete in quantities (Cournot) in a market in which demand is described by: P=260-2Q. each firm incurs no fixed cost but has a marginal cost of 20. Now imagine they collude to produce the monopoly output. Suppose that after the cartel is established, firm 1 decides to cheat on the collusion, assuming the other firm will continue to produce its half of the monopoly output. What will be firm 1's profit if firm 2 continues producing the monopoly outcome? a. 4500 b. 5200 c.4200 d. 4050 Should firm 2 respond and increas their quantity? Yes or No
Deviating from the collusive outcome Mays and McCovey are beer-brewing companies that operate in a duopoly (two-firm oligopoly). The daily marginal cost (MCMC) of producing a can of beer is constant and equals $0.60 per can. Assume that neither firm had any startup costs, so marginal cost equals average total cost (ATCATC) for each firm. Suppose that Mays and McCovey form a cartel, and the firms divide the output evenly. (Note: This is only for convenience; nothing in this model requires that the two companies must equally share the output.) Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together. table 1 When they act as a profit-maximizing cartel, each company will produce $____ cans and charge $______per can. Given this information, each firm earns a daily profit of $______, so the daily total industry profit in the beer market is $_______.…
AP CollegeBoard Test Booklet Unit 4 Problem Set Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate," you must show how you arrived at your final answer. Use the graph provided below to answer parts (a)-(e). Marginal Cost Average Total Cost Average Variable Cost 108 100 55 Demand 0 10 21 31 44 57 77 Quantity Marginal Revenue BigMed, a profit-maximizing firm, has a patent on a medical device, making it the only producer of that device. The graph above shows BigMed's demand, marginal revenue, average total cost, average variable cost, and marginal cost curves. (a) Calculate BigMed's total revenue if the firm produces the allocatively efficient quantity. Show your work. (b) Starting at a price of $100, if BigMed were to increase the price by 2%, will the quantity demanded decrease by more than 2%, by less…
To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn't Advertise Creamland Advertise 10, 10 18, 2 Doesn't Advertise 2, 18 11, 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $18 million, and Dairy King will make a profit of $2 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of _________ million if Dairy King advertises and a profit of ________ million if Dairy King does not advertise. If Creamland decides not to advertise, it will earn a profit of __________ million if Dairy King advertises and a profit of _________…
part ii-viii
Consider a strategic interaction between firms 1 and 2. In Stage 1, firm 1 chooses the level of advertising a > 0. In stage 2, firm 2 learns about firm 1's amount of advertising a. Subsequently, firms 1 and 2 compete in a Cournot fashion. That is, firms 1 and 2 simultaneously and independently choose their outputs: q1 and q2, where qi denotes the output of firm i = 1,2. The price that the consumers are willing to pay for the product produced by the two firms, or the inverse aggregate demand function, is given by 6a - q1 - q2. Firm 1's advertising cost is a3. Both firms have zero production costs. Both firms maximize their individual profits (equal to the total revenue minus total cost). In the unique subgame perfect equilibrium of the game, the two firms will choose the following strategies: a. Firm 1 will choose strategy (a = 3, q1 = a/3) while firm 2 will choose strategy q2 = a/3 b. Firm 1 will choose strategy (a = 1, q1 = 16/3 ) while firm 2 will choose strategy q2 = 16/3 c. Firm 1…