Firm 2 Low Price Low Price 2 Firm 1 0 High Price 7 1 2 High Price 0 6 a. Does either firm have a dominant strategy? Does this game have a unique, pure-strategy Nash equilibrium? Identify all pure and mixed-strategy Nash equilibria. b. How would your answers change if Firm 1 gets 5 instead of 7 when it chooses a low price and Firm 2 chooses a high price? 6

Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: Oligopoly
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2. Two firms face the following profit matrix:
Firm 2
Low Price
Low Price
2
Firm 1
0
7
High Price
1
2
b. How would your answers change if Firm 1 gets 5 instead of 7 when it chooses a low price
and Firm 2 chooses a high price?
16
High Price
0
6
a. Does either firm have a dominant strategy? Does this game have a unique, pure-strategy Nash
equilibrium? Identify all pure and mixed-strategy Nash equilibria.
Transcribed Image Text:2. Two firms face the following profit matrix: Firm 2 Low Price Low Price 2 Firm 1 0 7 High Price 1 2 b. How would your answers change if Firm 1 gets 5 instead of 7 when it chooses a low price and Firm 2 chooses a high price? 16 High Price 0 6 a. Does either firm have a dominant strategy? Does this game have a unique, pure-strategy Nash equilibrium? Identify all pure and mixed-strategy Nash equilibria.
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