A secluded off-ramp on a highway through the Prairie of Prax has two gas stations, the only gas stations for miles, Northgoings and Southgoings. Suppose Northgoings and Southgoings must simultaneously display their prices, choosing between a high price and low price gas. The payoff matrix for this game, showing potential daily profit, is displayed below. Assume both stations know all of the information in the matrix, and that this is a one-time payoff. Northgoings Decisions High Price Low Price N: $500 N: $800 High Price S: $400 S: $50 Southgoings Decisions N: $100 N: $250 Low Price S: $700 S: $200 (a) According to our model of game theory, Northgoings has a dominant strategy to [Select] (b) According to our model of game theory, Southlgoings has a dominant strategy to [ Select] V (c) According to our model of game theory, the competitive outcome, or Nash Equilibrium, Northgoings will earn [ Select] and Southgoings will earn [ Select] (d) On the other hand, if these two companies worked together and colluded, Northgoings will earn [Select] and Southgoings will earn [Select] (e) According to our model with profit-maximizing oligopolists in a one-time game such as this, why do we think these companies are more likely to end with the outcome in (c) rather than in (d)? [Select] >
A secluded off-ramp on a highway through the Prairie of Prax has two gas stations, the only gas stations for miles, Northgoings and Southgoings. Suppose Northgoings and Southgoings must simultaneously display their prices, choosing between a high price and low price gas. The payoff matrix for this game, showing potential daily profit, is displayed below. Assume both stations know all of the information in the matrix, and that this is a one-time payoff. Northgoings Decisions High Price Low Price N: $500 N: $800 High Price S: $400 S: $50 Southgoings Decisions N: $100 N: $250 Low Price S: $700 S: $200 (a) According to our model of game theory, Northgoings has a dominant strategy to [Select] (b) According to our model of game theory, Southlgoings has a dominant strategy to [ Select] V (c) According to our model of game theory, the competitive outcome, or Nash Equilibrium, Northgoings will earn [ Select] and Southgoings will earn [ Select] (d) On the other hand, if these two companies worked together and colluded, Northgoings will earn [Select] and Southgoings will earn [Select] (e) According to our model with profit-maximizing oligopolists in a one-time game such as this, why do we think these companies are more likely to end with the outcome in (c) rather than in (d)? [Select] >
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter15: Strategic Games
Section: Chapter Questions
Problem 3MC
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Answer part C and D
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