The dominant strategy for the firms in the duopoly market and establishing the equilibrium strategy combination and the Nash equilibrium for the market. Concept Introduction: Dominant Strategy - The strategy for a player for which he does better in terms of payoffs/profits irrespective of the strategy of the rival, is said to be his dominating strategy. Nash Equilibrium - The strategy combination for the two players which is mutually agreed upon for higher returns such that no one player has an incentive to deviate from it unilaterally, is said to be a Nash Equilibrium. FORD SELLING PRICE → $4,000 $8,000 $12,000 CHEVROLET SELLING PRICE↓ $4,000 8,8 12,6 14,2 $8,000 6,12 10,10 12,6 $12,000 2,14 6,12 7,7

Question

1. A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate fund, and the third is a (riskless) T-bill money market fund that yields a rate of 8%. The probability distributions of the risky funds have the following characteristics: Standard Deviation (%) Expected return (%) Stock fund (Rs) 20 30 Bond fund (RB) 12 15 The correlation between the fund returns is .10.

Answer 1

Question

Chapter 10, Problem 3.9P

To determine

The dominant strategy for the firms in the duopoly market and establishing the equilibrium strategy combination and the Nash equilibrium for the market.

Concept Introduction:

Dominant Strategy- The strategy for a player for which he does better in terms of payoffs/profits irrespective of the strategy of the rival, is said to be his dominating strategy.

Nash Equilibrium- The strategy combination for the two players which is mutually agreed upon for higher returns such that no one player has an incentive to deviate from it unilaterally, is said to be a Nash Equilibrium.

FORD SELLING PRICE → $4,000 $8,000 $12,000

CHEVROLET SELLING PRICE↓

$4,000 8,8 12,6 14,2

$8,000 6,12 10,10 12,6

$12,000 2,14 6,12 7,7

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