Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Chapter 13.A, Problem 2ARQ
To determine
Evaluate the statement whether it is true or false.
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4. The following payoff matrix shows the profit payoff to firms A and B from combinations of
price strategies HI and LO.
A
НІ
LOW
B
HI
(6, 6)
(16, -5)
LOW
(-7, 15)
(0, 0)
(a) In a one period game, what strategy would each firm follow, and why? Determine the
equilibrium on the one-period game.
(b) Now assume the game is infinite in length. Firm B goes HI in period 1 and continues
with HI so long as A does as well. Firm A is deciding between HI and LO. Determine
the
range of discount rates for which HI is the better choice for Firm A.
M5
8. Suppose there are two firms (Fr and F2) producing identical product competing for
20
market share and each of which would like to dominate the other, if possible. They
faced a choice between defending and cooperating. When either defends or bou
cooperate, neither is able to dominate the other. Assuming these preferences are reflected
in their profit pay-offs. If both the players choice to defend, their profit will be 1.500
each. When one Firm defends and the other cooperates their profit level will be 5.000 an
1.000 respectively. Similarly, when both cooperate they end up with profit level of 3.000
each. With this in mind:
a. Represent the above game in normal form/strategic form.
b. Identify the dominant strategy for both firms and the dominant strategy equilibrium.
c. Is the above equilibrium Nash equilibrium? Is it Pareto efficient allocation? Why?
d. Assuming the game is one-shoot game and Firm 1 moves first represent it in extended
form
Chapter 13 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
Ch. 13.1 - Prob. 1QQCh. 13.1 - Prob. 2QQCh. 13.1 - Prob. 3QQCh. 13.1 - Prob. 4QQCh. 13.4 - Prob. 1QQCh. 13.4 - The D2e segment of the demand curve D2eD1 graph...Ch. 13.4 - Prob. 3QQCh. 13.4 - Prob. 4QQCh. 13.A - Prob. 1ADQCh. 13.A - Prob. 2ADQ
Ch. 13.A - Prob. 3ADQCh. 13.A - Prob. 4ADQCh. 13.A - Prob. 1ARQCh. 13.A - Prob. 2ARQCh. 13.A - Prob. 3ARQCh. 13.A - Prob. 1APCh. 13.A - Prob. 2APCh. 13 - Prob. 1DQCh. 13 - Prob. 2DQCh. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - Prob. 10DQCh. 13 - Prob. 11DQCh. 13 - Prob. 12DQCh. 13 - Prob. 13DQCh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3P
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