Cooper and Rebecca run the only two lawncare companies in a small town. If they worked independently, they would each earn $3000. If they cooperated, they know they could raise the price of their lawncare services and service fewer lawns, but can each earn $4500. If one person raises prices and other does not, the person who raises prices will earn $1000 and the other will earn $6000. Draw a table representing their dilemm

Cooper and Rebecca run the only two lawncare companies in a small town. If they worked independently, they would each earn $3000. If they cooperated, they know they could raise the price of their lawncare services and service fewer lawns, but can each earn $4500. If one person raises prices and other does not, the person who raises prices will earn $1000 and the other will earn $6000. Draw a table representing their dilemm

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

Chapter16: Bargaining

Section: Chapter Questions

Problem 8MC

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Albena and Elena are two close friends who run a very popular restaurant where portions of either gozlemes ( a bread with spinach and feta cheese) or kebab are served. As shown on the table, Albena can make 20 portions of gozleme per hour but only 10 portions of kebab per hour. assume that Elena can make 8 portions of gozleme or 5 portions of kebab per hour. Suppose now that after a quarrel on this date, Albena and Elena decide not to coordinate their production and agree to divide the total orders of 80 portions of gozleme and 80 portions of kebab into two. Assume that a portion of both gozleme and kebab is sold at $3. To maximize her revenue, how should Elena allocate her time to the production of gozleme and kebab? For the preceding part, assume now that a portion of gozleme is sold at $3, whereas a portion of kebab is sold at $5. To maximize her revenue, how should now Elena allocate her time to the production of gozleme and kebab?
Two individuals each receive fifty dollars to play the following game. Independently of each other, they decide how much money to put in a common pot. They keep the rest for themselves. As for the money in the pot, it is increased by 80% and then distributed equally among the two individuals. For instance, suppose that the first individual puts $10 in the pot while the second individual puts $20. Increasing the total pot of $30 by 80% gives $54 to share equally between the two individuals. So the first individual’s payoff in this case is $(40 + 27) = $67, while the second individual’s payoff is $(30 + 27) = $57. (a) Compute the Nash equilibrium. (b) Is the Nash equilibrium Pareto efficient? Explain
Consider the following game played by four individuals, players 1, 2, 3, and 4. Each individual has $10,000. Each player can donate between $0 and $10,000 to build a public park that costs $20,000. If they collect enough money, they construct the park, which is worth $9,000 to each of them. However, if they collect less than $20,000, they cannot build a park. Furthermore, regardless of whether the park is built or not, individuals lose any donations that they make. a) Describe the Nash equilibria for a simultaneous game. What makes them equilibria? Hint: There are many equilibria, so you may want to use a mathematical expression! b) Suppose that players 1, 2, and 3, each donate $4,000 for the park. How much will player 4 donate and why. What are the resulting payoffs for the players? c) Suppose instead that player 1 donated first, player 2 second, player 3 third, and player 4 last. Furthermore, players could only donate in intervals of 1,000 (0, $1,000, $2,000, etc.). How much will…
Consider a game with two players A and B and two strategies X and Z. If both players play strategy X, A will earn $300 and B will earn $700. If both players play strategy Z, A will earn $1,000 and B will earn $600. If Player A plays strategy X and player B plays strategy Z, A will earn $200 and B will earn $300. If Player A plays strategy Z and player B plays strategy X, A will earn $500 and B will earn $400. Player B finds that: a) strategy Z is a dominant strategy. b) strategy X is a dominant strategy. c) he has no dominant strategy. d) strategy X is a dominated strategy. e) strategy Z is a dominated strategy.
Suppose we have two ice cream sellers, Blue Cool Ice Cream and Red Mango Ice Cream, deciding where to locate along a 1 kilometer long linear beach. Beachgoers are uniformly spread out everywhere along the beach. They do not like walking, and they view the ice cream from the two sellers as homogenous goods. Because of this, they will always buy from the nearest seller. The sellers cannot choose their price, only the location. A strategy for a player in this game is a distance between 0m and 1000m, which represents where the player will locate. For example, a distance of 0m is a strategy. The payoffs are the percentages of the market that each seller captures (depending on their two strategies). For example, if Blue Cool chooses 0m and Red Mango chooses 1000m, their payoffs are 50% and 50%. If the two sellers locate at exactly the same spot, they share the market and get 50% each. Suppose each player can only choose from 11 locations: 0m, 100m, 200m, 300m, 400m, 500m, 600m, 700m, 800m,…
Suppose we have two ice cream sellers, Blue Cool Ice Cream and Red Mango Ice Cream, deciding where to locate along a 1 kilometer long linear beach. Beachgoers are uniformly spread out everywhere along the beach. They do not like walking, and they view the ice cream from the two sellers as homogenous goods. Because of this, they will always buy from the nearest seller. The sellers cannot choose their price, only the location. A strategy for a player in this game is a distance between 0m and 1000m, which represents where the player will locate. For example, a distance of 0m is a strategy. The payoffs are the percentages of the market that each seller captures (depending on their two strategies). For example, if Blue Cool chooses 0m and Red Mango chooses 1000m, their payoffs are 50% and 50%. If the two sellers locate at exactly the same spot, they share the market and get 50% each. Suppose the two firms are no longer restricted to a finite number of locations; they can choose any…
You and a classmate are assigned a project on which you will receive one combined grade. You each want to receive a good grade, but you also want to avoid hard work. In particular, here is the situation: • If both of you work hard, you both get an A, which gives each of you 40 units of happiness. • If only one of you works hard, you both get a B, which gives each of you 30 units of happiness. • If neither of you works hard, you both get a D, which gives each of you 10 units of happiness. • Working hard costs 25 units of happiness. Complete the following payoff matrix given the previous information. In each cell, your classmate's payoff is on the left and yours is on the right. Your Decision Work Shirk Classmate's Decision Work , , Shirk , , The likely outcome is that your classmate and you . If you get this classmate as your partner on a series of projects throughout the year, rather than only once, you are…
You and a classmate are assigned a project on which you will receive one combined grade. (You each want to receive a good grade, but you also want to avoid hard work. In particular, here is the situation:• If both of you work hard, you both get an A, which gives each of you 40 units of happiness.• If only one of you works hard, you both get a B, which gives each of you 30 units of happiness.• If neither of you works hard, you both get a D, which gives each of you 10 units of happiness.• Working hard costs 25 units of happiness. a. Fill in the payoffs in the following decision box: REFER IMAGE b. What is the likely outcome? Explain your answer.c. If you get this classmate as your partner on a series of projects throughout the year, rather than only once, how might that change the outcome you predicted in part (b)?d. Another classmate cares more about good grades: She gets 50 units of happiness for a B and 80 units of happiness for an A. If this classmate were your partner (but your…
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Rosencrantz and Guildenstern play a game in which they simultaneously put down some number of coins with either a head or a tail showing on each coin. Rosencrantz puts down one coin and Guildenstern puts down two coins. Rosencrantz pays Guildenstern one dollar for each coin that shows the side that Rosencrantz played; for example, if Rosencrantz played a head and Guildenstern played a head and a tail, Rosencrantz would pay Guildenstern two dollars, since two heads were displayed among the three coins. a. Formulate a strategic game that represents this situation. b. Find all Nash equilibria of this game (including any mixed strategy equilibria). c. For each of the Nash equilibria in (b), give Guildenstern’s expected payoff.
Suppose Rashard and Alyssa are playing a game that requires both to simultaneously choose an action: Up or Down. The payoff matrix that follows shows the earnings of each person as a function of both of their choices. For example, the upper-right cell shows that if Rashard chooses Up and Alyssa chooses Down, Rashard will receive a payoff of 4 and Alyssa will receive a payoff of 5. Alyssa Up Down Rashard Up 8, 4 4, 5 Down 5, 4 6, 5 In this game, the only dominant strategy is for to choose . The outcome reflecting the unique Nash equilibrium in this game is as follows: Rashard chooses and Alyssa chooses.
Two roommates John and Joe are playing a simultaneous game of cleaning the apartment. If neither of them clean, the apartment gets filthy and both get a utility of 2. If John cleans and Joe doesn’t, John gets a utility of 1 and Joe gets a utility of 4. If Joe cleans and John doesn’t, Joe gets a utility of 1 and John gets a utility of 4 and if both clean up the apartment, they each get a utility of 3. If the apartment owner decides to fine both the roommates if the apartment is dirty, such that now if neither of them clean they each get a 5 utility loss, what would the new equilibrium be now? a. John cleans, Joe doesn’t b. Joe cleans, John doesn’t c. Neither of them clean the apartment d. Both A&B