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The U.S. government has decided to build a new off ramp for Interstate 5 in California. Exxon and Shell are both interested in building a gas station near the new off ramp. They can build the gas station near the off ramp for northbound traffic or they could build the gas station near the off ramp for southbound traffic. The profits for each outcome are illustrated in the accompanying payoff table: Shell Shell northbound southbound Exxon receives Exxon receives $60,000 profit $110,000 profit Exxon northbound Shell receives Shell receives $50,000 profit $100,000 profit Exxon receives Exxon receives $80,000 profit $50,000 profit Еxxon southbound Shell receives Shell receives $120,000 profit $50,000 profit

The U.S. government has decided to build a new off ramp for Interstate 5 in California. Exxon and Shell are both interested in building a gas station near the new off ramp. They can build the gas station near the off ramp for northbound traffic or they could build the gas station near the off ramp for southbound traffic. The profits for each outcome are illustrated in the accompanying payoff table: Shell Shell northbound southbound Exxon receives Exxon receives $60,000 profit $110,000 profit Exxon northbound Shell receives Shell receives $50,000 profit $100,000 profit Exxon receives Exxon receives $80,000 profit $50,000 profit Еxxon southbound Shell receives Shell receives $120,000 profit $50,000 profit

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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The U.S. government has decided to build a new off ramp for Interstate 5 in California. Exxon and Shell are both interested in building a gas station near the new off ramp. They can build the gas station near the off ramp for northbound traffic or they could build the gas station near the off ramp for southbound traffic. The profits for each outcome are illustrated in the accompanying payoff table: Shell Shell northbound southbound Exxon receives Exxon receives $60,000 profit $110,000 profit Exxon northbound Shell receives Shell receives $50,000 profit $100,000 profit Exxon receives Exxon receives $80,000 profit $50,000 profit Exxon southbound Shell receives Shell receives $120,000 profit $50,000 profit a. Select the Nash equilibrium, or equilibria, that occur if Exxon and Shell make these decisions simultaneously. Exxon builds southbound and Shell builds southbound. Exxon builds northbound and Shell builds southbound.
Transcribed Image Text:The U.S. government has decided to build a new off ramp for Interstate 5 in California. Exxon and Shell are both interested in building a gas station near the new off ramp. They can build the gas station near the off ramp for northbound traffic or they could build the gas station near the off ramp for southbound traffic. The profits for each outcome are illustrated in the accompanying payoff table: Shell Shell northbound southbound Exxon receives Exxon receives $60,000 profit $110,000 profit Exxon northbound Shell receives Shell receives $50,000 profit $100,000 profit Exxon receives Exxon receives $80,000 profit $50,000 profit Exxon southbound Shell receives Shell receives $120,000 profit $50,000 profit a. Select the Nash equilibrium, or equilibria, that occur if Exxon and Shell make these decisions simultaneously. Exxon builds southbound and Shell builds southbound. Exxon builds northbound and Shell builds southbound.
a. Select the Nash equilibrium, or equilibria, that occur if Exxon and Shell make these decisions simultaneously. Exxon builds southbound and Shell builds southbound. Exxon builds northbound and Shell builds southbound. Exxon builds southbound and Shell builds northbound. Exxon builds northbound and Shell builds northbound. b. Use the information in the payoff table to create a game tree for this sequential move game. This part is not graded, but you will need to make the game tree on your own to answer the following questions. c. The Nash equilibrium for the sequential move game where Exxon moves first is that Exxon builds northbound and Shell builds northbound southbound southbound Now suppose that and builds a gas station before Exxon. d. The Nash equilibrium for the sequential move game where Shell moves first is that Shell builds and northbound Exxon builds northbound southbound
Transcribed Image Text:a. Select the Nash equilibrium, or equilibria, that occur if Exxon and Shell make these decisions simultaneously. Exxon builds southbound and Shell builds southbound. Exxon builds northbound and Shell builds southbound. Exxon builds southbound and Shell builds northbound. Exxon builds northbound and Shell builds northbound. b. Use the information in the payoff table to create a game tree for this sequential move game. This part is not graded, but you will need to make the game tree on your own to answer the following questions. c. The Nash equilibrium for the sequential move game where Exxon moves first is that Exxon builds northbound and Shell builds northbound southbound southbound Now suppose that and builds a gas station before Exxon. d. The Nash equilibrium for the sequential move game where Shell moves first is that Shell builds and northbound Exxon builds northbound southbound
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