Like many students at college, Arturo struggles to find a parking space on campus. Every year he has to buy a parking permit, which allows him to park on campus. Unfortunately, buying a permit does not guarantee that he can find a parking spot. So he often gets to campus well before class starts, hoping to find a good parking spot, but ends up driving around until someone leaves. One day after his economics class, Arturo comes up with a potential solution to the problem. He suggests the following:

Like many students at college, Arturo struggles to find a parking space on campus. Every year he has to buy a parking permit, which allows him to park on campus. Unfortunately, buying a permit does not guarantee that he can find a parking spot. So he often gets to campus well before class starts, hoping to find a good parking spot, but ends up driving around until someone leaves. One day after his economics class, Arturo comes up with a potential solution to the problem. He suggests the following:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 1. Alice and Bob sell used CDs at music festivals. Each is deciding whether or not to set up their booth at the last festival of the summer. The festival is scheduled to take place in Alton, very near where Alice lives. It will cost her only $30 to travel the festival. Bob is farther away, and it will cost her $100 to travel to Alton. Both Alice and Bob would prefer to be only CD sellers at the festival, since they would avoid competition. If only one seller is at the festival, she will make $150 during the day (not counting travel costs). If both Bob and Alice sell CDs at the festival, they will lower their prices and each make $50 during the day. Both Alice and Bob receive $0 for not attending the festival. 1. Draw the Normal Form of the game Alice and Bob are playing, be sure to label the game completely. 2. Does either player have a dominant strategy? If so, what is it? 3. List all pure strategy Nash equilibria for this game. Remember that a Nash equilibrium is a strategy…
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