Two firms face the following payoff matrix shown to the right. Given these profits, Firm 2 wants to match Firm 1's price, but Firm 1 does not want to match Firm 2's price. Does either firm have a dominant strategy? Firm 1's dominant strategy Firm 2's dominant strategy and C Low Price Firm 2 Low Price $8 $0 Firm 1 $28 High F $4 $

Two firms face the following payoff matrix shown to the right. Given these profits, Firm 2 wants to match Firm 1's price, but Firm 1 does not want to match Firm 2's price. Does either firm have a dominant strategy? Firm 1's dominant strategy Firm 2's dominant strategy and C Low Price Firm 2 Low Price $8 $0 Firm 1 $28 High F $4 $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Delta Depot Multiple Colors One Color $25, $115 $60, $55 Gamma Enterprises Multiple Colors $90, $95 One Color $105, $65 Consider the above game where Delta Depot and Gamma Enterprises are considering whether to offer their products in a single color or multiple colors. Which of the following is true based on the solution to this game? Only Gamma Enterprises has a dominant strategy Delta would prefer an outcome where Gamma offers one color rather than multiple colors both companies have a dominant strategy the Nash equilibrium occurs where both companies offer multiple colors since they earn more profits that way.
Two firms are considering entering a new market where currently no other firm exist. It is predicted that there will be enough demand so that both these firms can make positive economic profits. There is no fixed cost and two firms are identical. Discuss how a simultaneous entry game will be different from a sequential entry game for these two firms. Also discuss, how the output decision and market share will be different in these two scenarios.
The following payoff table lists the profits of a buyer and a seller. The seller acts first by choosing a sale price ($9, $8, or $6). The buyer then decides the quantity of the good to purchase (two units, four units, six units, or eight units). a. Suppose the buyer and seller transact only once. Does the buyer have a dominant strategy? Depending on the price quoted, what is his best response? What price should the seller set? Explain carefully. Buyer Quantities 2 Units 4 Units 6 Units 8 Units P $9 10, 6 20, 5 30, 0 40, 8 Seller P $8 8, 8 16, 9 24, 6 32, 0 Prices P $6 4, 12 8, 17 12, 18 16, 16 b. Suppose the seller and buyer are in a multiyear relationship. Each month, the buyer quotes a price and the seller selects her quantity. How might this change each player’s behavior? c. Now suppose the buyer and seller are in a position to negotiate an agreement specifying price and quantity. Can they improve on the result in part (a)? Which quantity should they set? What price would be…
2. Consider the following "location game." There are two ice cream sellers (Seller 1 and Seller 2) in a small city. Residents are uniformly located on a straight street of length 1. The ice cream sellers need to choose where to set up their carts, and each resident will purchase one unit of ice cream from the nearest seller. The city council has fixed the price of the ice cream, and as a result, each seller just wants sell as much ice cream as possible. (a) We think of this "location game" as a simultaneous-move game, in which each player's payoff is the proportion of residents that buy from her cart. Is this game with discrete strategies or continuous strategies? Please state the set of (pure) strategies for both sellers. Is this game zero-sum or non-zero-sum? (b) Find all NE(s) of this game.
Consider a market with two firms, Target and Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ($30) or a low price (s13) for the new Miley Cyrus CD. These price strategies with corresponding profits are depicted in the payoff matrix to the right. Target's profits are in red and Wal-Mart's are in blue. Target Target's dominant strategy is to pick a price of S Price = $30 Price = $13 $7,000 $2.500 Price = $30 S7,000 $15,000 Wal - Mart $15.000 $5,000 Price = $13 $2,500 $5,000 Wal-Mart's dominant strategy is to pick a price of $ The new equilibrium market wage will be and the new equilibrium market employment level will be higher unchanged lower higher lower unchanged
26.When isoquants get progressively closer together there is Select one: a. increasing returns to scale b. decreasing returns to scale C. constant returns to scale
Consider a market with an incumbent and two potential entrants. The incumbent can take on one incumbent (through predatory pricing), but can't take on both. If neither potential entrant enters the market both get 0. If one enters, they get -5 and other gets 0. If both enter, both get 2. A. First consider what happens when the firm simultaneously decide whether to enter the market. Draw the table. B. What is the mixed strategy equilibrium? C. Now consider what happens when one firm decides whether to enter before the other. Draw the game tree. Find the subgame perfect equilibrium
Boeing and Airbus are the two primary producers of passenger aircraft. Both firms are preparing to announce their new long-distance jets. Each firm can design their plan to maximize comfort or the number of seats. If both firms choose to maximize the same characteristic they will sell 100 planes each and if they maximize different characteristics they will each sell 150 planes each. Both firms want to maximize sales. Draw a game tree and find the equilibrium strategies and payoffs. Show your work.
4. Two firms face the following payoff matrix, where each is choosing whether to charge a low or high price: Firm 1 Low (2,0) (0,7) High Firm 2 Low (1,2) High (6,6) Is there any pure-strategy Nash equilibrium? What is the mixed-strategy Nash equilibrium?
Firm A a. Low Price High Price Both firms will earn 0 C. Firm B Low Price 0,0 -10, 50 What is the payoff for each firm in this simultaneous game? High Price 50, -10 d. Both firms will earn 25 25, 25 b. Firm A will earn 50 and firm B will earn -10 Firm A will earn -10 and firm B will earn 50
Economics Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not then the firm that offers the discount will increase its profit. The figure shows the payoff matrix for this game. Alpha Offer Don't offer Alpha eams S60,000 Alpha eams $20,000 What is the Nash equilibrium in this game? Offer Bota earns $60,000 Bota earns $100.000 O A. There is no Nash equilibrium Beta Alpha earns $100.000 Alpha earms $80,000 O B. Beta offers a student discount but Alpha does not Don't OC. Both Alpha and Beta offer a student discount Beta eams $20,000 Beta earns $80,000 offer O D. Alpha offers a student discount but Beta does not