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Suppose there are two firm that is firm 1 and firm 2, each firm has three possible choice as it must decide whether or not to (i) exit at the industry immediately (E).

Suppose there are two firm that is firm 1 and firm 2, each firm has three possible choice as it must decide whether or not to (i) exit at the industry immediately (E).

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. Find best responses of one of the firms to the strategies of its counterpart. Which of the strategies is not a best response to any pure strategy?

2. Let firm 2 play strategies (0, 1, 2) with probabilities (q1, q2, q3), q1 +q2 +q3 = 1. Calculate the expected payoff of firm 1 from playing each of the three strategies. Show that the strategy which is not the best response to any pure strategies is strictly dominated by the other two strategies if firm 2 plays mixed strategies.

Suppose there are two firm that is firm 1 and firm 2, each firm has three possible choice as it must decide whether or not to (i) exit at the industry immediately (E). (ii) exit at the end of the quarter (T). (iii) exit at the end of the next quarter (N). a) Matrix formy FIRM-2 T 0.2 -1,-1 1,-1 ETN firm-1 T E 0.0 2,0 4.0 0,4 -1,1 -2.2
Transcribed Image Text:Suppose there are two firm that is firm 1 and firm 2, each firm has three possible choice as it must decide whether or not to (i) exit at the industry immediately (E). (ii) exit at the end of the quarter (T). (iii) exit at the end of the next quarter (N). a) Matrix formy FIRM-2 T 0.2 -1,-1 1,-1 ETN firm-1 T E 0.0 2,0 4.0 0,4 -1,1 -2.2
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