14.6. Let us ignore mixed strategies. Asahi and Kirin are the two largest sellers of beer in Japan. These two firms compete head to head in the dry beer category in Japan. The following table shows the profit (in millions of yen) that each firm earns when it charges different prices for its beer: Kirin ¥690 ¥630 180, 180 178, 184 175, 185 173, 186 ¥720 186, 173 194, 180 198, 190 196, 196 ¥660 184, 178 183, 183 182, 192 180, 194 185, 175 192, 182 191, 191 190, 198 ¥630 Asahi ¥660 ¥690 ¥720 a) Does Asahi have a dominant strategy? Does Kirin? b) Both Asahi and Kirin have a dominated strategy: Find and identify it. c) Assume that Asahi and Kirin will not play the dominated strategy you identified in part (b) (i.e., cross out the dominated strategy for each firm in the table). Having eliminated the dominated strategy, show that Asahi and Kirin now have another dominated strategy. d) Assume that Asahi and Kirin will not play the dominated strategy you identified in parts (b) and (c). Having eliminated this dominated strategy, determine whether Asahi and Kirin now have a dominant strategy. e) What is the Nash equilibrium in this game?
14.6. Let us ignore mixed strategies. Asahi and Kirin are the two largest sellers of beer in Japan. These two firms compete head to head in the dry beer category in Japan. The following table shows the profit (in millions of yen) that each firm earns when it charges different prices for its beer: Kirin ¥690 ¥630 180, 180 178, 184 175, 185 173, 186 ¥720 186, 173 194, 180 198, 190 196, 196 ¥660 184, 178 183, 183 182, 192 180, 194 185, 175 192, 182 191, 191 190, 198 ¥630 Asahi ¥660 ¥690 ¥720 a) Does Asahi have a dominant strategy? Does Kirin? b) Both Asahi and Kirin have a dominated strategy: Find and identify it. c) Assume that Asahi and Kirin will not play the dominated strategy you identified in part (b) (i.e., cross out the dominated strategy for each firm in the table). Having eliminated the dominated strategy, show that Asahi and Kirin now have another dominated strategy. d) Assume that Asahi and Kirin will not play the dominated strategy you identified in parts (b) and (c). Having eliminated this dominated strategy, determine whether Asahi and Kirin now have a dominant strategy. e) What is the Nash equilibrium in this game?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 3E
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