Consider the game matrix below. A company is thinking about establishing itself in a market. Another company is already in this market and can choose to start a price war or not. Company 1 can thus choose "Establish" or "Do not establish"; company 2 "Price war" or "Nothing price war". The numbers in the cells are profits (in thousands of SEK). In each cell, company l's profit is listed first: (100,60) thus means that company 1 receives one hundred thousand SEK in profit and that company 2 receives sixty thousand SEK in profit. Both firms are profit maximizing. 4. Företag 2 Priskrig Inget priskrig Etablera (100, 60) (120,25) Företag 1 Etablera ej (170, 50) (80,90) 4a Analyze whether company 1 has a dominant strategy. Motivate based on the gains i the game matrix. 4b Analyze whether company 2 has a dominant strategy. Motivate based on the gains i the game matrix. 4c Determine all Nash equilibria of the game. Justify based on the winnings in the game matrix

Consider the game matrix below. A company is thinking about establishing itself in a market. Another company is already in this market and can choose to start a price war or not. Company 1 can thus choose "Establish" or "Do not establish"; company 2 "Price war" or "Nothing price war". The numbers in the cells are profits (in thousands of SEK). In each cell, company l's profit is listed first: (100,60) thus means that company 1 receives one hundred thousand SEK in profit and that company 2 receives sixty thousand SEK in profit. Both firms are profit maximizing. 4. Företag 2 Priskrig Inget priskrig Etablera (100, 60) (120,25) Företag 1 Etablera ej (170, 50) (80,90) 4a Analyze whether company 1 has a dominant strategy. Motivate based on the gains i the game matrix. 4b Analyze whether company 2 has a dominant strategy. Motivate based on the gains i the game matrix. 4c Determine all Nash equilibria of the game. Justify based on the winnings in the game matrix

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter15: Imperfect Competition

Section: Chapter Questions

Problem 15.8P

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