Suppose only two airlines, United and Delta, provide flights between Atlanta and Winston - Salem. Both firms must choose whether to advertise or not advertise. The advertising strategies with corresponding profits are depicted in the payoff matrix to the right. United Airline's profits are in blue and Delta Airline's are in red. United Airline's dominant strategy is to and Delta Arline's dominant strategy is to What is the Nash equilibrium for this game? O A. United and Delta will both choose not to advertise. O B. United will choose to advertise and Delta will choose not to advertise.

Suppose only two airlines, United and Delta, provide flights between Atlanta and Winston - Salem. Both firms must choose whether to advertise or not advertise. The advertising strategies with corresponding profits are depicted in the payoff matrix to the right. United Airline's profits are in blue and Delta Airline's are in red. United Airline's dominant strategy is to and Delta Arline's dominant strategy is to What is the Nash equilibrium for this game? O A. United and Delta will both choose not to advertise. O B. United will choose to advertise and Delta will choose not to advertise.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.
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In 2018, Delta Air Lines said that it was increasing its fares by 4% because its fuel bill jumped by 33% from the previous yoar. Other airines also announced fare increases. Assuming that these firms are oligopolistic and the outcome is a Nash-Coumot equilibrium, why did the prices rise less than in proportion to the firms' cost? Price rose less than the firms' costs in this oligopoly because O A. demand is not perfectly inelastic. O B. consumers are not price sensitive. OC. the firms are price takers. D. air travel has no close substitutes.
Consider the following simultaneous game. a. b. C. d. Player 1 U Player 2 L 8,8 3,0 R 3,3 8,3 What are the pure-strategy Nash equilibria? Identify. Find whether there are any mixed-strategy equilibria. Assume now the game above is being modified as a sequential game where player 1 would move first and player 2 second. Find all Nash and subgame perfect equilibria for the game. Would a Nash equilibrium always be Pareto efficient? Use your answer in (a) to explain.
A secluded off-ramp on a highway through the Prairie of Prax has two gas stations, the only gas stations for miles, Northgoings and Southgoings. Suppose Northgoings and Southgoings must simultaneously display their prices, choosing between a high price and low price gas. The payoff matrix for this game, showing potential daily profit, is displayed below. Assume both stations know all of the information in the matrix, and that this is a one-time payoff. Northgoings Decisions High Price Low Price N: $500 N: $800 High Price S: $400 S: $50 Southgoings Decisions N: $100 N: $250 Low Price S: $700 S: $200 (a) According to our model of game theory, Northgoings has a dominant strategy to [Select] (b) According to our model of game theory, Southlgoings has a dominant strategy to [ Select] V (c) According to our model of game theory, the competitive outcome, or Nash Equilibrium, Northgoings will earn [ Select] and Southgoings will earn [ Select] (d) On the other hand, if these two companies…