Which of the following is the COLLUSIVE OUTPUT in the Game Theory Matrix below? * Firm B Payoff = Expected Profit ($m) High Price Low Price High Price $4m; $4m $-1m, $6m Firm A Low Price $6m; $-1m $1m, $1m Both firms choose High Price Both firms choose Low Price Firm A chooses Low Price; Firm B chooses High Price Firm A chooses High Price; Firm B chooses Low Price

Which of the following is the COLLUSIVE OUTPUT in the Game Theory Matrix below? * Firm B Payoff = Expected Profit ($m) High Price Low Price High Price $4m; $4m $-1m, $6m Firm A Low Price $6m; $-1m $1m, $1m Both firms choose High Price Both firms choose Low Price Firm A chooses Low Price; Firm B chooses High Price Firm A chooses High Price; Firm B chooses Low Price

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. The following is an interpretation of the rivalry between the United States (USA) and the Soviet Ünion (USSR) during the cold war. Each side has the choice of two strategies: Aggressive and Restrained. The payoff table is given as follows: USSR Restrained Aggressiveness Restrained 4,3 1,4 USA Aggressiveness 3,1 2,2 a) Consider this game when the two countries move simultaneously. Find all pure strategy Nash equilibria. b) Next consider three alternative ways in which the game could be played with sequential moves: (i) The USA moves first and the USSR moves second. (i) the USSR moves first and the USA moves second. (i) The USSR moves first, and the USA moves second, but the USSR has a further move after the USA moves. For each case, draw the game tree and find the subgame-perfect Nash equilibrium. c) What are the key strategic issues (commitment, credibility and so on) for the two countries. (Note: Be concise. Your answer should not exceed 300 words].
Superstore (S) and Megastore (M) are two competing discount supermarkets. If neither store advertises, S makes $115 in profits and M makes $165. If both stores advertise, S makes $80 and M makes $95. If M advertises and S does not, they make $305 and $55 respectively. If S advertises and M does not, they make $285 and $65 respectively. Based on Game Theory, what will the two firms do? Hint: illustrate the Nash equilibrium to support your answer.
Find the Nash equilibrium strategy and payoff in this simultaneous game. Show your work. Firms can collude (C) or not collude (NC) and their profits in millions are as follows. Please see attached.
Up Down Up Up Down Down Player 1 Player 2 In the game above, what is/are the EFFICIENT sub-game perfect Nash equilibrium? (up,up) (up,down) (down, up) (down, down) No EFFICIENT equilibrium exists P1 gets $100 P2 gets $100 P1 gets $10 P2 gets $10 P1 gets $15 P2 gets $5 P1 gets $110 P2 gets $10
O Cell A O Cell C O Cell E O Cell I None of the above
According to game theory, what do firms try to do? maximize their profits by acting in ways to minimize damage from competitors capture competitors markets by developing slightly differentiated products gain market shares through predatory pricing maximize market share through strategic advertising and product placement
Refer to the accompanying game. Firm A Firm B Low Price High Price Low Price (10,9) (15,8) High Price (−10,7) (11,11) What are the secure strategies for firm A and firm B, respectively?
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.
Two discount stores (Megastore and Superstore) are interested in expanding their market share through advertising. The table below depicts the strategic outcomes (profits) of both stores with and without advertising. Superstore - Advertise Superstore - Don't Advertise Megastore - Advertise $95, $80 $305, $55 Megastore - Don't Advertise $65, $285 $165, $115 When the game does reach Nash Equilibrium, the payoffs for both stores will be a) Megastore $95 and Superstore $80 b) Megastore $305 and Superstore $55 c) Megastore $65 and Superstore $285 d) Megastore $165 and Superstore $115
QUESTION 2 In the game above, what is/are the sub-game perfect Nash equilibrium? (up, up) (up, down) ( down, up) (down, down) No equilibrium exists QUESTION 2 Up Down Player 1 No equilibrium exists Up In the game above, what is/are the sub-game perfect Nash equilibrium? (up,up) (up,down) (down, up) □ (down, down) Down Up Down Player 2 P1 gets $45 P2 gets $155 P1 gets $100 P2 gets $10 P1 gets $85 P2 gets $85 P1 gets $95 P2 gets $95
Two firms are competing to establish one of two new wireless communication standards, A or B. A strategy is a choice of standard, and an outcome of this game is a choice of standard by each firm – for example, (A, B) represents the case where Firm 1 decides to develop standard A and Firm 2 develops standard B. Here, the first letter will always correspond to Firm 1’s decision, and the second letter to Firm 2’s decision. Firm 1 has the following preferences over outcomes, in order of highest to lowest preferred: it prefers (A, A) to (B, A) to (A, B) to (B, B). Firm 2 prefers (A, B) to (A, A) to (B, A) to (B, B). Suppose that firms simultaneously decide which standard to develop. What is the pure strategy Nash equilibrium?
Problem 2. Consider the partnership-game we discussed in Lecture 3 (pages 81-87 of the textbook). Now change the setup of the game so that player 1 chooses x = [0, 4], and after observing the choice of x, player 2 chooses y ≤ [0, 4]. The payoffs are the same as before. (a) Find all SPNE (subgame perfect Nash equilibria) in pure strategies. (b) Can you find a Nash equilibrium, with player 1 choosing x = 1, that is not subgame perfect? Explain.