Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 15, Problem 15.6IP
To determine
The equilibrium of the given game.
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Students have asked these similar questions
E3
2
Consider the two-stage, static game depicted in Figure 5.1 involving two companies that enter into
an agreement to maximize total profits. The payoffs in this game are in millions of dollars. The
optimal strategy for both firms is to:
Firm Y
A
C
(3, 3)
(1, 1)
(1, 1)
Firm X
(1, 1)
(5, 5)
(7, 4)
C
(1, 1)
(4, 7)
(6, 6)
Payoffs: (Firm X, Firm Y)
FIGURE 5.1
O Play B in stage 1 and stage 2.
O Play B in stage 1 and play A in stage 2.
O Play C in stage 1 and stage 2.
O Play B in stage 1 and play C in stage 2.
O Play C in stage 1 and play B in stage 2.
Chapter 15 Solutions
Managerial Economics: A Problem Solving Approach
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- Using the Figure below, consider now that the entrant, if fought, has the possibility of withdrawing from the industry (at a loss of 1 for the entrant and again of 8 for the incumbent), or staying (at a loss of 5 for each player). What is the equilibrium of this game? Discuss if the entrant is better off with or without the ability to withdraw.arrow_forwardGame Theory. Consider a Stackelberg competition game with three firms. Firm 1 chooses q1 first. Firm 2 observes q1 and chooses q2. Firm 3 observes both and chooses q3. These three firms are the only firms in the market, so the sum of their outputs is equal to total market supply, i.e. q1+q2+q3=Q. Suppose demand is given by P=12-Q. For simplicity of calculation, suppose each firm has marginal costs of 0, i.e. c1(q1)=0, c2(q2)=0 and c3(q3)=0. (1) What quantity does Firm 1 produce in the SPNE of the game? (2) What quantity does Firm 2 produce in the SPNE of the game? (3) What quantity does Firm 3 produce in the SPNE of the game?arrow_forwardQUESTION 14 Consider a oligopoly with two firms. Each firm has constant marginal cost of 3 dollar per unit and zero fixed costs. Suppose the market demand curve is P = 15 - Q, where Q = Q₁ + Q₂ is the sum of the quantities produced by both firms. Suppose each firm can produce either 1, 2, 3, or 4 units. Which of the following is a Nash equilibrium outcome? Each firm produces 4 units. Each firm produces 3 units. Each firm produces 1 unit. Each firm produces 2 units.arrow_forward
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