(d) Consider a simultaneous-move game between two firms choosing to sell theirproduct at either £6, £7 or £8. The actions and payoffs are given in the matrix below.Firm 2's Prices£6£7£8Firm 1's prices£64, 53, 52, 1£70,42, 13,0£8-1, 14, 30, 2What are the Nash equilibria of this game? Game theory is often used by firmscompeting under an oligopoly as a means of determining their best strategy. Why isgame theory a useful tool and which characteristics of an oligopoly make itparticularly useful for firms competing in this market structure? One outcome of anoligopoly is that firms may have an incentive to collude. Explain some of theconditions that make collusion more likely to occur and how game theory canexplain why collusive agreements often break down.

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(d) Consider a simultaneous-move game between two firms choosing to sell their product at either £6, £7 or £8. The actions and payoffs are given in the matrix below. Firm 2's Prices £6 £7 £8 Firm 1's prices £6 4, 5 3, 5 2, 1 £7 0, 4 2, 1 3,0 £8 -1, 1 4, 3 0, 2 What are the Nash equilibria of this game? Game theory is often used by firms

(d) Consider a simultaneous-move game between two firms choosing to sell their product at either £6, £7 or £8. The actions and payoffs are given in the matrix below. Firm 2's Prices £6 £7 £8 Firm 1's prices £6 4, 5 3, 5 2, 1 £7 0, 4 2, 1 3,0 £8 -1, 1 4, 3 0, 2 What are the Nash equilibria of this game? Game theory is often used by firms

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.6P

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