Trick and Gear are the only two producers of flying brooms. They colluded together illegally to strict output and increase price Each firm has two strategies: Comply with the decisions or Cheat to make more profit individually. ▪ If both Comply, each firm makes $2 million a week. ▪ If both Cheat, each firm makes zero economic profit. ▪ If Trick Complies and Gear Cheats, Trick incurs a loss of $1 million and Gear makes a profit of $4.5 million. ▪ If Gear Complies and Trick Cheats, Gear incurs a loss of $1 million and Trick makes a profit of $4.5 million. Construct a payoff matrix for the game that Trick and Gear must play
Trick and Gear are the only two producers of flying brooms. They colluded together illegally to strict output and increase price Each firm has two strategies: Comply with the decisions or Cheat to make more profit individually. ▪ If both Comply, each firm makes $2 million a week. ▪ If both Cheat, each firm makes zero economic profit. ▪ If Trick Complies and Gear Cheats, Trick incurs a loss of $1 million and Gear makes a profit of $4.5 million. ▪ If Gear Complies and Trick Cheats, Gear incurs a loss of $1 million and Trick makes a profit of $4.5 million. Construct a payoff matrix for the game that Trick and Gear must play
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Trick and Gear are the only two producers of flying brooms. They
colluded together illegally to strict output and increase price Each
firm has two strategies: Comply with the decisions or Cheat to make
more profit individually.
▪ If both Comply, each firm makes $2 million a week.
▪ If both Cheat, each firm makes zero economic profit.
▪ If Trick Complies and Gear Cheats, Trick incurs a loss
of $1 million and Gear makes a profit of $4.5 million.
▪ If Gear Complies and Trick Cheats, Gear incurs a loss
of $1 million and Trick makes a profit of $4.5 million.
Construct a payoff matrix for the game that Trick and Gear must
play
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education