· It was discovered that two domestic manufacturing companies were fixing prices. If each company issilent, there is no penalty, but production and business are disrupted due to continuous investigation bythe Fair Trade Commission. The penalty for revealing the estimated loss due to the investigation andcollusion is as follows.- Question: Where is the Nash Equilibriur.?Firm 2SilenceDisclosureSilence -100, -100-680, OFirm 1Disclosure0, -680-470, -470fine (a hundred million won)

Nash equilibrium is be a idea among theory of games wherever the optimum outcome of a game is…

Answered: • It was discovered that two domestic…

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

QUESTION 13 Consider a market where two firms (1 and 2) produce differentiated goods and compete in prices. The demand for firm 1 is given by D₁(P₁, P2) = 140 - 2p1 + P2 and demand for firm 2's product is D2 (P1, P2) 140 - 2p2 + P1 Both firms have a constant marginal cost of 20. What is the Nash equilibrium price of firm 1? (Only give a full number; if necessary, round to the lower integer; no dollar sign.)
1. Assume the payoff matrix for a game is as follows. Firm B X Y Firm A 6,6 14,2 2 2, 14 9,9 What is the maximum interest rate at which collusion could occur between these firms with a trigger strategy if the game is played an infinite number of times?
Q2
Note:Hand written solution should be avoided.
Match the definition to each term listed below. Number 1 2 3 4 5 6 7 8 9 10 11 Definition A table that shows the payoffs each firm earns from every combination of firm strategies An agreement among firms to charge the same price or otherwise not to compete An option that is better than any alternative option regardless of what the other firm does An outcome of a strategic game from which neither rival wants to deviate A game outcome in which players seek to increase their mutual payoff A practice where one firm initiates a price change and the other firms follow the leader A game in which the firms choose their strategies at the same time One firm's gain must equal the other firm's loss A game in which the sum of Firms select their optimal strategies in a single time period without regard to possible interactions in subsequent time periods A game that occurs more than once the two firms' outcomes is positive Instructions: Enter a numeric response corresponding to the number of the…
a. Consider the game faced by the British and Dutch managers when both are given contracts that compensate them with (1)/(2) of 1% of revenue. The strategic form game is shown. Find the Nash equilibria. b. Now consider the game between the British and Dutch shareholders as to what kind of contracts to give their managers. Assume that they simultaneously choose between a contract that gives the manager 1% of profit and one that gives him (1)/(2) of 1% of revenue. Assume, as before, that the shareholders’ payoff is profit (and we ignore the trivial amount that they pay to their managers). After a pair of contracts is selected, the two contracts are revealed to both managers, and the managers then choose between supply levels of low, moderate, and high. Find all SPNE.
2. Consider an infinitely repeated game in which, in each period, two firms with zero costs choose quantities and prices are given by: p1 = 1 - q1 - q2/2, p2 = 1 - q2 - q1/2. Firms have a common discount factor of 8 = 1/2. a) Explain what a trigger strategy is and determine whether the firms can attain the joint profit maximising outcome in a subgame perfect equilibrium using trigger strategies. b) Explain what a stick and carrot strategy is and discuss whether it is possible to attain the joint-profit maximising outcome in a subgame perfect equilibrium using stick and carrot strategies.
5. Two firms compete repeatedly in a market of homogeneous goods. Each year, the firms can choose to charge a low or high price. The following payoff table summarizes their payoffs each year. The competition goes on indefinitely. Let 5 E (0, 1) denote the discount factor for both firms. Firm 2 Low High Low 0, 0 5, 0 Firm 1 High 0, 5 4, 4 Consider an n-period punishment trigger strategy s: • Play "High price" in the first stage. • In stage t> 2, if some player deviated to "Low price" in the last period when he is supposed to play "High price", then play "Low price" for n periods and then restart the game. In other words, after playing "Low price" for n periods, play "High price" in the next stage as if it is the first stage of the game. Otherwise, play "High price". Find the necessary and sufficient condition on & for (s, s) to be an SPE. A sufficiently simplified inequality will do.
This is game theory question/ Quantity Competition and Nash Equilibrium I think the answers are stated in the picture. I just need an explanation about how they came up with these numbers. Thank you
Please help with #4- A and B
#7
Suppose 2 firms must decide whether or not to invest in building a new factory to expand production. The payoff matrix from this decision is shown below in the image What are the possible values of y such that Firm 2 has the dominant strategy to not expand?

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS