Consider a marks with two mits, targn ara vval-Mart, In sem S their music department. Both stores must choose whether to charge a high price ($20) or a low price ($13) for the new Miley Cyrus CD, These price strategies with corresponding profits are depicted in the payoff matrix Target's profits are in red and Wai-Mart's are in blue Target's dominant strategy is to pick a price of $ Wal-Mart's dominant strategy is to pick a price of $ What is the Nash equilibrium for this game? A. ANash equilibrium does not exist for this game B. The Nash equilibrium is for Target to choose a price of $20 and Wal-Mart to choose a price of $13. OC. The Nash equilibrium is for Target and Wal-Mart to both choose a price of $20 OD. The Nash equilibrum is for Target to choose a price of $13 and Price = $20 Wal-Mart Price - $13 Price = $20 $7,000 Target $11,000 $7,000 $2,000 Price = $13 $2,000 $3,000 $11,000 $3,000 o d G Next E

Consider a marks with two mits, targn ara vval-Mart, In sem S their music department. Both stores must choose whether to charge a high price ($20) or a low price ($13) for the new Miley Cyrus CD, These price strategies with corresponding profits are depicted in the payoff matrix Target's profits are in red and Wai-Mart's are in blue Target's dominant strategy is to pick a price of $ Wal-Mart's dominant strategy is to pick a price of $ What is the Nash equilibrium for this game? A. ANash equilibrium does not exist for this game B. The Nash equilibrium is for Target to choose a price of $20 and Wal-Mart to choose a price of $13. OC. The Nash equilibrium is for Target and Wal-Mart to both choose a price of $20 OD. The Nash equilibrum is for Target to choose a price of $13 and Price = $20 Wal-Mart Price - $13 Price = $20 $7,000 Target $11,000 $7,000 $2,000 Price = $13 $2,000 $3,000 $11,000 $3,000 o d G Next E

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5PA

See similar textbooks

Similar questions

Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Film A) is large and the other film (Film B) is small, as the prisoners dilemma box in Table 10.4 shows. Assuming that both films know the payoffs, what is the likely outcome in this case?
Give typing answer with explanation and conclusion Suppose two firms produce identical good. The inverse demand curve for the good is: P = 240-Q, where Q is the total quantity produced by the two firms. Each firm has a constant marginal cost 20 of producing the good and fixed cost = 100. Find the Cournot Nash equilibrium of this game. What quantity will each firm produce? what will be the market price? What would be the profits of each firm?
Solve for the Nash equilibrium (or equilibria) in each of the following games. (a) The following two-by-two game is a little harder to solve since firm 2’spreferred strategy depends of what firm 1 does. But firm 1 has a dominantstrategy so this game has one Nash equilibrium. Firm 2 Launch Don’tFirm 1 Launch 60, -10 100, 0 Don’t 80, 30 120, 0 What is the Nash equilibrium of this simultaneous-move game? (b) What would the outcome of this game be if instead firm 1 moved first and then, after seeing what firm 1 chose, firm 2 chose it strategy? In this case firm 1 doesn’t necessarily need to choose a best response, but firm 2 must choose a best response since it moves second.
Solve for the Stackelberg subgame-perfect Nash equilibrium for the fol- lowing game tree (see next page). What is the joint-profit maximizing outcome? Why is that not the outcome of this game?
Two firms with differentiated products are competing in price. Firm A and B face thefollowing demand curves: Q_A = 70 − 2P_A + P_B and Q_B = 120 − 2P_B + P_Arespectively. Assume production is costless.a. Give equations for and graph each firm’s reaction curve.b. If both firms set their prices at the same time, what is the Nash equilibriumprice, quantity, and profit for each firm?c. Suppose A sets its price first and then B responds. What price and quantitydoes each firm set now? Is it advantageous to move first?d. Compare the profits from part b and c. Which firm benefits more from thesequential price choosing? (Please do b-d, thanks :))
13) Two identical firms are engaged in Cournot competition, with cost functionsTCA(QA) = 30 QA and TCB(QB) = 30 QB. The market demand is given by P = 480 –3Q.a) Plot the best response functions and report the Cournot-Nash equilibrium quantities, price and profits.b) What are the prices, quantities, and profits for the firms if they decide to collude and share profits equally?c) Show that firms have an incentive the deviate from the collusive outcome.d) Find the Stackelberg equilibrium if A leads and B follows.e) Show the equilibria in the previous parts on the inverse demand function. Calculate and identify consumersurplus and deadweight loss in each equilibrium. If you can only answer a limited amount of questions, please answer d and e :)
Synergy and Dynaco are the only two firms in a specific high-tech industry. They facethe following payoff matrix as they decide upon the size of their research budget:a. Does Synergy have a dominant strategy? Explain.b. Does Dynaco have a dominant strategy? Explain.c. Is there a Nash equilibrium for this scenario? Explain. (Hint: Look closely at thedefinition of Nash equilibrium.)
Use the information in the following table, which summarizes the payoffs (i.e., profit) to two firms that must decide between an average-quality and a high quality product, to answer the questions that follow: Firm 2 Average Quality High Quality Firm 1 Average Quality 600, 600 400, 1100 High Quality 1100, 400 900, 900 a. What is each player's dominant strategy? Explain your reasoning.b. Referring to the table above, is this an example of a prisoner's dilemma game? Why or why not?c. Is there a Nash equilibrium? If so, what is it?
Consider a duopoly in which two identical firms compete by setting their quantities but Firm 1 has first mover advantage (i.e., Firm 1 is the Stackelberg Leader). We want to consider whether Firm 1 should use its advantage to drive Firm 2 out of the market.
Consider a situation where two firms, 1 and 2, compete by choosing prices simultaneously. Theycan either compete (charge a low price) or cooperate (collude, charging a high price). The firmsplay this competition game repeatedly and indefinitely, using a grim trigger strategy toincentivize cooperation. They use the same interest rate, i, to discount future payoffs. Payoffsare $4,050 when both firms cooperate and $3,600 when they compete. If one firm charge a lowprice while the other charges a high price, the firm charging the low price gets $7,200, and theother gets zero, but now assume there is a 10% chance that aregulatory agency will give both firms a $1,500 fine in each period if they are caught colluding.Find the condition on the interest rate, i , necessary for sustaining the cooperative equilibrium.Which of the following statements is correct?(a) For any i < 1/7 the firms will cooperate.(b) For any i < 1/11 the firms will cooperate.(c) For any i > 1/11 the firms will…