Macroeconomics (12th Edition) (Pearson Series in Economics)
12th Edition
ISBN: 9780133872644
Author: Michael Parkin
Publisher: PEARSON
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Chapter 8.6, Problem 3RQ
To determine
Explain the equation of exchange.
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Use a game tree to illustrate why an aircraft manufacturer may price below the current marginal cost in the short run if it has a steep learning curve.
(Hint:
Show that learning by doing lowers its cost in the second period.)
Part 2
Assume for simplicity the game tree is illustrated in the figure to the right. Pricing below marginal cost reduces profits but gives the incumbent a cost advantage over potential rivals. What is the subgame perfect Nash equilibrium?
Answer
M” method
Given the following model, solve by the method of “M”. (see image)
Chapter 8 Solutions
Macroeconomics (12th Edition) (Pearson Series in Economics)
Ch. 8.1 - Prob. 1RQCh. 8.1 - Prob. 2RQCh. 8.1 - Prob. 3RQCh. 8.1 - Prob. 4RQCh. 8.1 - Prob. 5RQCh. 8.2 - Prob. 1RQCh. 8.2 - Prob. 2RQCh. 8.2 - Prob. 3RQCh. 8.2 - Prob. 4RQCh. 8.2 - Prob. 5RQ
Ch. 8.3 - Prob. 1RQCh. 8.3 - Prob. 2RQCh. 8.3 - Prob. 3RQCh. 8.3 - Prob. 4RQCh. 8.3 - Prob. 5RQCh. 8.4 - Prob. 1RQCh. 8.4 - Prob. 2RQCh. 8.4 - Prob. 3RQCh. 8.5 - Prob. 1RQCh. 8.5 - Prob. 2RQCh. 8.5 - Prob. 3RQCh. 8.5 - Prob. 4RQCh. 8.5 - Prob. 5RQCh. 8.6 - Prob. 1RQCh. 8.6 - Prob. 2RQCh. 8.6 - Prob. 3RQCh. 8.6 - Prob. 4RQCh. 8 - Prob. 1SPACh. 8 - Prob. 2SPACh. 8 - Prob. 3SPACh. 8 - Prob. 4SPACh. 8 - Prob. 5SPACh. 8 - Prob. 6SPACh. 8 - Prob. 7SPACh. 8 - Prob. 8SPACh. 8 - Prob. 9SPACh. 8 - Prob. 10APACh. 8 - Prob. 11APACh. 8 - Prob. 12APACh. 8 - Prob. 13APACh. 8 - Prob. 14APACh. 8 - Prob. 15APACh. 8 - Prob. 16APACh. 8 - Prob. 17APACh. 8 - Prob. 18APACh. 8 - Prob. 19APACh. 8 - Prob. 20APACh. 8 - Prob. 21APACh. 8 - Prob. 22APACh. 8 - Prob. 23APACh. 8 - Prob. 24APACh. 8 - Prob. 25APACh. 8 - Prob. 26APACh. 8 - Prob. 27APA
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