Refer to the following formula for expected payoff Expected payoff (Probability of rival matching Loss from price cutj (Probability of rival not matching Gain from price cut) Suppose the payoff to each of four strategic interactions is as follows Rival Response Your Company's Action Reduce Price Don't Reduce Price Gain $36.000 No loss or gain Reduce price Loss $7.500 Don't reduce price Loss $35.000 Instructions: Enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. If the probability of rivals matching a price reduction is 90 percent, what is the expected payoff of a price cut? 7800 b. If the probability of rivals reducing price even though you dont reduce your price is 3 percent, what is the expected payoff of not reducing price? 7800

Refer to the following formula for expected payoff Expected payoff (Probability of rival matching Loss from price cutj (Probability of rival not matching Gain from price cut) Suppose the payoff to each of four strategic interactions is as follows Rival Response Your Company's Action Reduce Price Don't Reduce Price Gain $36.000 No loss or gain Reduce price Loss $7.500 Don't reduce price Loss $35.000 Instructions: Enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. If the probability of rivals matching a price reduction is 90 percent, what is the expected payoff of a price cut? 7800 b. If the probability of rivals reducing price even though you dont reduce your price is 3 percent, what is the expected payoff of not reducing price? 7800

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

Assume there are two firms X and Y, considering which of two alternative prices to charge, £25 or £19 for X and £20 or £15 for Y. The firms make their decisions simultaneously: i.e. neither firm knows the price choice of its rival. The various profits are illustrated in the following pay-off matrix: Strategies and payoffs for X are in blue and for Y in red. (a) What is firm Y’s best response to each of the two different prices firm X could charge? Does firm Y have a dominant strategy? (b)What is firm X’s best response to each of the different prices firm Y could charge? Does firm X have a dominant strategy? (C) What is/are the Nash equilibrium/equilbria? What is the most likely outcome of this game? Explain your answer.
** please be advised this is for practice only in preperation ** (a) x = 4, y = 3(b) x = 1, y = 2(c) x = 0, y = 3(d) x = 4, y = 0(e) None of the values above make this strategy profile a Nash equilibrium.
Give typing answer with explanation and conclusion
M7
Two friends are deciding what activity to do on Saturday when they meet up. The following table shows the payoff matrix that represents the strategic interaction between them in a one-shot, simultaneous game. Select all the correct answers. Friend A Restaurant Cinema There is more than one Nash equilibrium Restaurant 10, 10 Friend B 4,7 Cinema 7,4 8,8
a) Write out the extensive form of a game between a farmer (playing in the first round) and nature (playing a mixed strategy in the second round). Assume that the farmer can either pay a cash rent of $1500 for land (English system) or 1/2 of crop production to the landlord (sharecropping). Assume the farmer is planting corn and will produce 2 tons of corn. Assume that nature has a 50% chance of playing a strategy in which the price of corn is $3500/ton and a 50% chance of playing a strategy in which the price of corn is $500/ton. The farmer keeps any money left after paying cash rent and sells any corn left after paying the landlord in sharecropping. b)What is the most that a risk neutral farmer would be willing to pay for an accurate prediction of the price of corn in problem 1 before choosing whether to pay cash rent or sharecrop?
2
Player 2 Middle Left P1: $45 P1: $70 Up P2: $45 P2: $50 Player 1 P1: $50 P1: $60 Middle P2: $50 P2: $60 P1: $60 P1: $50 Down P2: $60 P2: $70 In the game shown above, list all of the Nash Equilibrium (please check ALL that apply) (up, left) (up, middle) (up, right) (middle, left) (middle, middle) (middle, right) (down, left) (down, middle) (down, right) No equilibrium Right P1: $45 P2: $60 P1: $50 P2: $70 P1: $60 P2: $60
3. The following is an interpretation of the rivalry between the United States (USA) and the Soviet Ünion (USSR) during the cold war. Each side has the choice of two strategies: Aggressive and Restrained. The payoff table is given as follows: USSR Restrained Aggressiveness Restrained 4,3 1,4 USA Aggressiveness 3,1 2,2 a) Consider this game when the two countries move simultaneously. Find all pure strategy Nash equilibria. b) Next consider three alternative ways in which the game could be played with sequential moves: (i) The USA moves first and the USSR moves second. (i) the USSR moves first and the USA moves second. (i) The USSR moves first, and the USA moves second, but the USSR has a further move after the USA moves. For each case, draw the game tree and find the subgame-perfect Nash equilibrium. c) What are the key strategic issues (commitment, credibility and so on) for the two countries. (Note: Be concise. Your answer should not exceed 300 words].
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For the friend-foe game, recall that there were 3 Nash equilibria possible, but the equilibria set didn't include the cooperative outcome, for which both players would win. Friend Foe Friend 500,500 0,1000 Foe 1000,0 0.0 a) If the game is played répeatedly. propose a play strategy that will enforce cooperation. For what valucs of o (discount factor) the equilibrium will be (Friend. Friend)?
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