Microsoft and a smaller rival often have to select from one of two competing technologies. The rival always prefers to select the same technology as Microsoft (because compatibility is important), while Microsoft always wants to select a different technology from its rival. Describe the equilibrium of this game.

Microsoft and a smaller rival often have to select from one of two competing technologies. The rival always prefers to select the same technology as Microsoft (because compatibility is important), while Microsoft always wants to select a different technology from its rival. Describe the equilibrium of this game.

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

Chapter15: Strategic Games

Section: Chapter Questions

Problem 15.3IP

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15-1 Mr. and Mrs. Ward typically vote oppositely in elections and so their votes “cancel each other out.” They each gain two units of utility from a vote for their positions (and lose two units of utility from a vote against their positions). However, the bother of actually voting costs each one unit of utility. Diagram a game in which they choose whether to vote or not to vote.
Table 17-6 Two home - improvement stores (Lopes and HomeMax) in a growing urban area are interested in expanding their market share. Both are interested in expanding the size of their store and parking lot to accommodate potential growth in their customer base. The following game depicts the strategic outcomes that result from the game. Increases in annual profits (in millions of dollars) of the two home - improvement stores are shown in the following figure. Refer to Table 17-6. Increasing the size of its store and parking lot is a dominant strategy for Question 8 options: Lopes, but not for HomeMax. HomeMax, but not for Lopes. both stores. neither store.
Microsoft and a smaller rival often have to select from one of two competing technologies. The rival always prefers to select the same technology as Microsoft (because compatibility is important), while Microsoft always wants to select a different technology from its rival. Describe the equilibrium of this game.
Consider the following strategic interaction between two Australia telecommuncation companies deciding to set the prices of their ‘unlimited calls‘ mobile package.Try to explain the business reasons behind the relationships between the various payoffs. For example, why is Low the best response to the opponent playing High? Why is the payoff from (High,High) higher for both players than from (Medium, Medium)?
1) Two firms are considering entering a new market where currently no other firm exist. It is predicted that there will be enough demand so that both these firms can make positive economic profits. There is no fixed cost and two firms are identical. Discuss how a simultaneous entry game will be different from a sequential entry game for these two firms. Also discuss, how the output decision and market share will be different in these two scenarios. 2) In two players dynamic games the player who moves second gets the advantage because we solve the game backwards. Explain why or why not? 3) Asma has a credit card account with Bank Muscat. The bank is considering whether to raise Asma’s credit card interest rate. Asma can respond by moving to National bank of Oman (NBO) or do nothing. If Bank Muscat raises Asma’s interest rate and Asma does nothing, then Bank Muscat increases profit by 300 OMR while Asma receives -300 OMR. If Bank Muscat raises Asma’s interest rate and Asma transfers her…
Two firms are considering entering a new market where currently no other firm exist. It is predicted that there will be enough demand so that both these firms can make positive economic profits. There is no fixed cost and two firms are identical. Discuss how a simultaneous entry game will be different from a sequential entry game for these two firms. Also discuss, how the output decision and market share will be different in these two scenarios.
Problem II. Suppose a small town has only two firms (firm1 and firm 2) selling the same product. Each firm can either set a high price (H) or a low price (L) for its product. The payoff matrix below displays the profits per day given the combination of prices for both firms. The first entry shows firm1’s profits while the second entry shows the second firm’s profits. The information displayed in the playoff matrix are known by both firms. Firm 2 High price Low Price Firm 1 High price $210; $220 $80; $260 Low Price $240; $160 $150; $140 Does each firm have a dominant strategy to set a high price, a dominant strategy to set a low price, or does it have no dominant strategy? In other words, find the dominant strategy of each firm, if it exists. Explain your answer. Assuming that the two firms do not cooperate to set prices, what will be the profits of each firm? The local authorities of the…
(Table: Samsung and Apple’s Payoff Table) Suppose that a market is dominated by two large firms, Samsung and Apple. Both have two choices: to Advertise or Do not advertise. The payoff table below shows the potential revenues associated with each firm’s strategies. For example, if Apple advertises and Samsung does not, the payoff to Apple is $75,000 and Samsung’s payoff is -$25,000. What are Apple and Samsung’s respective dominant strategies? Apple (right payoffs) Samsung Do not advertise Advertise Do not advertise (50000, 50000) (-25000, 75000) Advertise (75000, -25,000) (10000,10000) Group of answer choices Do not advertise, Do not advertise Advertise, Advertise Do not Advertise, Advertise Advertise, Do not Advertise
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Consider the following information for a static game. If you advertise and your rival advertises, you each will earn $5 million in profits. If you choose not to advertise and your rival chooses not to advertise, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the firm that does not advertise will earn $1 million. Assuming that each player cares only about his or her own profits, the Nash equilibrium is? Explain your answer in three long paragraphs (intro body and conclusion)
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A game involves two players: player A and player B. Player A has three strategies a1, a2 and a3 while player B has three strategies b1, b2 and b3. Player B b1 b2 b3 a1 -40,30 70,20 -10,120 Player A a2 40,60 80,80 60,20 a3 -30,40 -50,110 150, -70 Assuming that this is a one-time game, answer the following questions: Is there any dominant strategy for each player? What is the secure strategy of each player. What is the Nash equilibrium of the game?