(Use for questions 1 - 3): Two soap producers, the Fortnum Company and the Maison Company, can stress either newspapers or magazines in their forthcoming advertising campaignsThe payoff matrix (profit in millions of dollars) is as follows:Maison CompanyStress MagazinesStress NewspapersМ, $8MF, $7MM, $9MF, $8MStress NewspapersFortnum CompanyМ, $7MF, $8MМ, S8MF, S9MStress MagazinesIs this a game of prisoners' dilemma? Why or why not? Is there a Nash Equilibrium? Why or why not?

This is not a game of Prisoner’s dilemma, as the output that is best for both the company is…

Answered: (Use for questions 1 - 3): Two soap…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6)Game Theory: The Prisoners’ Dilemma: Assume that the Wilson and Spalding athletic equipment companies are in a one-shot game for market share and profits, but that they have the option of choosing only one of two possible price strategies for basketballs: $20 or $80. Obviously if they choose different strategies, the firm with the lower price will win the entire market. The firms face the following payoff matrix (See Chap. 10). Wilson\ \Spalding Wilson $ 20 Price Wilson $ 80 Price Spalding $ 20 Price $ 400, $ 400 $ 1500, $ 0 Spalding $ 80 Price $ 0, $ 1500 $ 1000, $ 1000 What strategy will each firm choose? Why? Which strategy is dominant? Which strategy is preferred by each firm? What will be the outcome of the one-shot game? Where is the Nash equilibrium? Which outcome would be best for the two firms? What will happen if the game is repeated an infinite number of times?
Two rival companies competing in the same market need to decide their plans for future expansion of their stores. The Table below shows the possible outcomes of their mutually interdependent actions (payoffs are profits in £m) Giga Company Titanic Conglomerate No Change Refurbishment of existing stores Large Expansion No Change 30, 40 25, 35 15, 24 Refurbishment of existing stores 35, 30 28, 32 18, 33 Large Expansion 12, 22 18, 20 20, 25 The Nash equilibrium: (A) does not exist. (B) occurs when both firms choose Refurbishment of existing stores. (C) occurs when both firms choose Large Expansion. (D) occurs when both firms choose No Change.
QUESTION 13 Consider a market where two firms (1 and 2) produce differentiated goods and compete in prices. The demand for firm 1 is given by D₁(P₁, P2) = 140 - 2p1 + P2 and demand for firm 2's product is D2 (P1, P2) 140 - 2p2 + P1 Both firms have a constant marginal cost of 20. What is the Nash equilibrium price of firm 1? (Only give a full number; if necessary, round to the lower integer; no dollar sign.)
MCQ 27 Consider the following game in which two firms (OLD and NEW) are considering whether or not to advertise to increase sales. Each firm knows that the impact on profits depends on what the other firm chooses to do. The possible profit outcomes of the game are shown below, with OLD's profits shown as the first number in each pair and NEW's profits shown as the second number: NEW Advertise Not Advertise Advertise 10, 5 15, 1 OLD Not Advertise 5, 8 20, 3 Assuming the firms aim to earn as much profit as possible, which of the following is TRUE for the game? A I do not want to answer this question. OLD's dominant strategy is to advertise C OLD's dominant strategy is not to advertise NEW's dominant strategy is not to advertise E NEW's dominant strategy is to advertise F the dominant strategy for both OLD and NEW is to advertise
here are two firms in the market, Pepsi and Coke. Strategies: Low price (price promotion, LP), Medium price (regular price, RP), high price (new price strategy, HP). Payoffs: Coke, Pepsi’s Net Profits; LP, LP: $1.4m, $1.2m; LP, RP: $3.1m, $0.6m; LP, HP: $3.9m, -$1.3m. RP, LP: $1.3m, $1.8m; RP, RP: $2.0m, $1.8m; RP, HP: $4.3m, $-0.3m. HP, LP: -$1.2m, $3.6m; HP, RP: $0.8m, $3.9m; HP, HP: $2.8m, $2.5m. In this game, the NE is (are): (HP, HP) (LP, LP) and (HP, HP) (LP, LP) There is no NE in this game (RP, RP)
AP CollegeBoard Test Booklet Unit 4 Problem Set Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate," you must show how you arrived at your final answer. Use the graph provided below to answer parts (a)-(e). Marginal Cost Average Total Cost Average Variable Cost 108 100 55 Demand 0 10 21 31 44 57 77 Quantity Marginal Revenue BigMed, a profit-maximizing firm, has a patent on a medical device, making it the only producer of that device. The graph above shows BigMed's demand, marginal revenue, average total cost, average variable cost, and marginal cost curves. (a) Calculate BigMed's total revenue if the firm produces the allocatively efficient quantity. Show your work. (b) Starting at a price of $100, if BigMed were to increase the price by 2%, will the quantity demanded decrease by more than 2%, by less…
To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn't Advertise Creamland Advertise 10, 10 18, 2 Doesn't Advertise 2, 18 11, 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $18 million, and Dairy King will make a profit of $2 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of _________ million if Dairy King advertises and a profit of ________ million if Dairy King does not advertise. If Creamland decides not to advertise, it will earn a profit of __________ million if Dairy King advertises and a profit of _________…
Suppose that GE is trying to prevent Maytag from entering the market for high efficiency clothes dryers. Even though high efficiency dryers are more costly to produce, they are also more profitable as they command sufficiently higher prices from consumers. The following payoffs table shows the annual profits for GE and Maytag for the advertising spending and entry decisions that they are facing. GE MAYTAG Advertising = $12m Advertising = $0.7m Stay Out $0, $30m $0, $35m Enter $1m , $20m $12m, $15 Based on this information, can GE successfully prevent Maytag from entering this market by increasing its advertising levels? What is the equilibrium outcome in this game? Suppose that an analyst at GE is convinced that just a little bit more advertising by GE, say another $2m, would be sufficient to deter enough customers from buying Maytag, thus, yield less than $0 profits for Maytag in the event it enters. Suppose that spending an extra $2m on advertising…

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