Part 2: First Long QuestionThere are two French bakeries in a small town: Le MeilleurCroissant (C), owned by Camille, and Le Meilleur Pain AuChocolat (P), owned by Paul. In each period of an infinitelyrepeated game, they compete a la Bertrand, with marketdemand given by Q(pmin) = 10 - Pmin- Even though they sellidentical goods, they have different marginal costs: cc = 2 and%3DCp = 4 (Paul bakes just as well but is bad at businessdecisions). There are no fixed costs.Question 6Turns out that Camille and Paul are married, and so theychoose prices to maximize the joint profits of the two firms.Because both love baking and love each other, they alsojointly decide that both firms should be selling positiveamounts in their optimal plan. What prices do they choose?Pc = 6, pp = 11Pc = 6.5, pp = 6.5Pc = 6, pp = 6Pc = 7, pp = 7%3DO pc = 6, pp = 7

For the above game Bertrand price competition is possible in which the one with higher marginal cost…

Part 2: First Long Question There are two French bakeries in a small town: Le Meilleur Croissant (C), owned by Camille, and Le Meilleur Pain Au Chocolat (P), owned by Paul. In each period of an infinitely repeated game, they compete a la Bertrand, with market demand given by Q(pmin) = 10 - Pmin: Even though they sell identical goods, they have different marginal costs: cc = 2 and %3D Cn = 4 (Paul bakes just as well but is bad at business

Part 2: First Long Question There are two French bakeries in a small town: Le Meilleur Croissant (C), owned by Camille, and Le Meilleur Pain Au Chocolat (P), owned by Paul. In each period of an infinitely repeated game, they compete a la Bertrand, with market demand given by Q(pmin) = 10 - Pmin: Even though they sell identical goods, they have different marginal costs: cc = 2 and %3D Cn = 4 (Paul bakes just as well but is bad at business

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

Suppose that Snapface and Instashot are the only two firms in a hypothetical market that produce and sell polaroid cameras. 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 cameras. Snapface Pricing High Low For example, the lower-left cell shows that if Snapface prices low and Instashot prices high, Snapface will earn a profit of $18 million, and Instashot will earn a profit of $2 million. Assume this is a simultaneous game and that Snapface and Instashot are both profit-maximizing firms. Instashot Pricing High Low 11, 11 2, 18 18, 2 10, 10 If Snapface prices high, Instashot will make more profit if it chooses a high price, and if Snapface prices low, Instashot will make more profit if it chooses a price. If Instashot prices high, Snapface will make more profit if it chooses a chooses a ▼ price. Considering all of the information given, pricing high If the firms do not collude,…
Question 2 (Choices Involving Strategy): Suppose there are two competing Gyms in a local town. Each gym is individually owned and has three pricing levels to choose from: Low, Medium and High (PL,PM, and PH). Consider the table below as the outcomes for each combination of strategies (they are yearly profits in the thousands). Can you predict the outcome using ONLY iteratively dominated strategies? Why or why not? Find the Nash Equilibrium(a) using best responses. Is this the best outcome? Now, suppose that there was a sudden increase in the cost of equipment that meant the low price was no longer viable, and both choosing the medium price level meant only 50 (thousand) profit for each gym. Nothing else changes. What is the pure and mixed strategy Nash equilibrium of this new game? Gym 1 is on the left and Gym 2 is on the top. The first number inside every box is Gym 1's profit and the second (after the comma) is Gym 2's profit. (10 Marks) PL PMPH PL 125, 125 200, 75 375,50 PM 75, 250…
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?
Imagine a small town with three car repair shops competing for a limited number of customers. Explain why the three shops working together to keep their prices high is unlikely to be a Nash equilibrium.
Assume the following scenarios. First, identify their nature of the situation (that is, which type of game and situation is implied) and second, discuss each one of them in terms of outcomes and possible solutions. (a) A cartel has a collective interest in restricting output to earn a monopoly profit. At the same time, cartel members can increase their individual profits by cheating on the cartel, that is, exceeding their quotas. (b) Abnormally cold winter temperatures bring the threat of a shortage of natural gas for heating buildings and homes.
O Cell A O Cell C O Cell E O Cell I None of the above
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…
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.)
2
Consider a Stackelberg game of quantity competition between two firms. Firm 1 is the leader and firm 2 is the follower. Market demand is described by the inverse demand function P=1000-4Q. Each firm has a constant unit cost of production equal to 20. Suppose firm 2's unit cost of production is c<20. What value would c have so that in the Nash Equilibrium, the two firms, the leader and the follower, had the same market share?
I have constructed a Bertrand game (competition in prices) and presented you with the reaction functions of each firm. P2 P1 = 12.5 + 4 P1 P2 == Use excel to draw the reaction functions. Solve for the Nash equilibrium + n IN
Consider a Cournot competition game. The market demand function is: p = 4 – q1 – q2, where p is price and q is firm i's output level. Suppose that the firm's marginal cost of production is: C1 = 1, c2 = 0, respectively. A) Find the Nash equilibrium of the above game.