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
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 4MC
To determine
Nash equilibrium.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
QUESTION 15
Consider the following information for a simultaneous move game: 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.
Megastore
Superstore
Advertise
Advertise
$95, $80
Don't Advertise $65, $285
b. Megastore $95 and Superstore $80
c. Megastore $65 and Superstore $285
d. Megastore $165 and Superstore $115
Don't Advertise
$305, $55
$165, $115
If the stores could co-operate, what is the new Nash equilibrium?
a Megastore $305 and Superstore $55
Consider the following information for a simultaneous-move game: two discount stores (megastore and superstore) are interested in expanding their market share through advertising. The table below depicts the profits of both stores with and without advertising. Payoffs for Megastore are in bold.
A Nash Equilibrium
Superstore
Advertise
Don't Advertise
Megastore
Advertise
$95, $80
$305, $55
Don't Advertise
$65, $285
$165, $115
A Nash equilibrium
for the Megastore to advertise and for the Superstore to advertise
for the Megastore to advertise and for the Superstore not to advertise
for the Megastore to not advertise and for the Superstore to advertise
for the Megastore to not advertise and for the Superstore to not advertise
O Cell A
O Cell C
O Cell E
O Cell I
None of the above
Chapter 15 Solutions
Managerial Economics: A Problem Solving Approach
Knowledge Booster
Similar questions
- Consider the following information for a simultaneous-move game: two discount stores (megastore and superstore) are interested in expanding their market share through advertising. The table below depicts the profits of both stores with and without advertising. Payoffs for Megastore are in bold A Nash Equilibrium Superstore Advertise Don't Advertise Megastore Advertise $95, $80 $305, $55 Don't Advertise $65, $285 $165, $115 If firms could collude, then it would be optimal. for the Megastore to advertise and for the Superstore to advertise for the Megastore to advertise and for the Superstore not to advertise for the Megastore to not advertise and for the Superstore to advertise for the Megastore to not advertise and for the Superstore to not advertisearrow_forwardSuppose that Green Giant and Red Rover are two companies competing in the canned vegetable market. Each is contemplating an aggressive new ad campaign. The payoffs of each decision are listed below, where Green Giant is player 1. Green/Red Ad Campaign No Ad Campaign |Ad Campaign |1 million, 1 million zero, 3 million No Ad Campaign 3 million, zero 2 million, 2 million What is the Nash equilibrium of the game? a. (advertise, don't advertise) b. (advertise, advertise) c. (don't advertise, don't advertise) d. (don't advertise, advertise)arrow_forwardFind all of the Nash equilibrium of the following three player game. Player 1 chooses rows (a,b). Player 2 chooses columns (c,d). Player 3 chooses matrices (x.y). Player 3 receives the third listed payoff for cach outcome. 5,5,5 4,4,0 8,8,3 7,7,3 1,3,1 4,2,0 3,2,4 3,1,0 a by A) (b,d.x) and (a,d.y) B) (b.cy) OC) (b,d,x) D) (a,d,x) and (b,c.y) E) (b,c,x) OF) (a,d.x)arrow_forward
- Economics Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not then the firm that offers the discount will increase its profit. The figure shows the payoff matrix for this game. Alpha Offer Don't offer Alpha eams S60,000 Alpha eams $20,000 What is the Nash equilibrium in this game? Offer Bota earns $60,000 Bota earns $100.000 O A. There is no Nash equilibrium Beta Alpha earns $100.000 Alpha earms $80,000 O B. Beta offers a student discount but Alpha does not Don't OC. Both Alpha and Beta offer a student discount Beta eams $20,000 Beta earns $80,000 offer O D. Alpha offers a student discount but Beta does notarrow_forwardImagine that there are two snowboard manufacturers (FatSki and WideBoard) in the market. Each firm can either produce ten or twenty snowboards per day. The table below (see attached) shows the profit per snowboard for each firm that will result given the joint production decisions of these two firms. Draw the game payoff matrix for this situation. Does either player have a dominant strategy? If so, what is it? What is the Nash equilibrium solution and how many boards should each player produce each day? Since FatSki and WideBoard must play this game repeatedly (i.e. make production decisions every day), what strategy would you advise them to play in order to maximize their payoff over the long term?arrow_forwardConsider the following extensive form of the game. The outcome in the subgame perfect Nash equilibrium of this game is [ Select one option] ["Large; Don't Enter", "Large; Enter", "Small; Don't Enter", "Small; Enter"]. It would not pay for the incumbent to produce the large quantity if its profits from producing large quantity is less than $ [ Select one option ] ["50", "60", "100", "0"].arrow_forward
- Please please give answer completearrow_forward1. Two electricity firms compete in the same market and are deciding their level of advertising in order to increase customers and profits. The following matrix shows the profits (in millions) according to the strategy chosen: Firm 1 Strategies Low Advertising Aggressive Advertising Firm 2 Low Advertising 15, 15 20, -2 Aggressive Advertising -2, 20 5,5 a. Identify the one-shot Nash equilibrium. Comment. b. Suppose the players know this game will be repeated exactly 10 times. Can they achieve payoffs that are better than the one-shot Nash equilibrium? Explain. c. Suppose this game is infinitely repeated and the interest rate is 5%. Can the players achieve the collusive outcome? Explain.arrow_forwardThe following table shows two firms in a single-stage game. Each firm makes its decision without knowledge of the other firm's decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. In the Nash equilibrium of this game, Pepsi earns a profit of _and Coca-Cola earns a profit of Pepsi Advertise Does Not Advertise $50 million $37.5 million Advertise $50 million $75 million Coca-Cola $75 million $67.5 million Does Not Advertise $37.5 million $67.5 million $67.5 million; $67.5 million d. $75 million; $37.5 million а. b. $30 million; $30 million $37.5 million; $75 million е. $50 million; $50 million с.arrow_forward
- In a small town there are two pizza restaurants . If neither restaurant advertises, its revenue will not change. If only one firm advertises, the firm that advertises will double its revenue and the firm that doesn't advertise will see a decrease in its revenue, but if both firms advertise, their revenue will not change. What outcome would be predicted by game theory in this market? Both restaurants will advertise. Game theory would predict chat sometimes one restaurant would advertise, and the rest of the time both will advertise. Neither restaurant will advertise Game theory is only a theory and cannot predict real-world events. One restaurant will advertise.arrow_forward. Find the Nash equilibrium of the following modified Rock-Paper-Scissors game: • When rock (R) beats scissors (S), the winner’s payoff is 10 and the loser’s payoff is −10. • When paper (P) beats rock, the winner’s payoff is 5 and the loser’s payoff is −5. • When scissors beats paper, the winner’s payoff is 2 and the loser’s payoff is −2. • In case of ties, both players receive 0 payoff. You are suposed to create a system of equations and then solve for them and find 3 probabilities- please show how to do thatarrow_forward4. Using a payoff matrix to determine the equilibrium outcome Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. The following payoff matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for fryers. Flashfry Pricing High Low Warmbreeze Pricing High Low 11, 11 2,13 13, 2 10, 10 For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $13 million, and Warmbreeze will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfry and Warmbreeze are both profit-maximizing firms. price, and if Flashfry prices low, Warmbreeze will make more profit if it If Flashfry prices high, Warmbreeze will make more profit if it chooses a chooses a price. If Warmbreeze prices high, Flashfry will make more profit if it chooses a chooses a price. Considering all of the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning