Game Theory. 1. Yuppie town has two food stores, LA Boulangerie, which sells bread, and La Fromagerie, which sells cheese. It costs $1 to make a loaf of bread and
1. Yuppie town has two food stores, LA Boulangerie, which sells bread, and La Fromagerie, which
sells cheese. It costs $1 to make a loaf of bread and $2 to make a pound of cheese. If La
Boulangerie's
cheese, their respective weekly sales, Q 1 thousand loaves of bread and Q 2 thousand pounds of
cheese, are given by the following equations:
a) For each store, write its profits as a function of P 1 and P 2 , and find the Nash
prices
b) Suppose that the two stores collude and set prices jointly to maximize the sum of their
profits. Find the joint profit-maximizing prices for the stores.
c) Provide an explanation for the differences between the Nash equilibrium prices and those
that maximize joint profits.
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Provide a short intuitive explanation for the differences between the
Nash
is joint profit maximization not a Nash equilibrium?
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)