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- Synergy and Dynaco are the only two firms in a specific high-tech industry. They facethe following payoff matrix as they decide upon the size of their research budget:a. Does Synergy have a dominant strategy? Explain.b. Does Dynaco have a dominant strategy? Explain.c. Is there a Nash equilibrium for this scenario? Explain. (Hint: Look closely at thedefinition of Nash equilibrium.)Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd = 10,000 – 100P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $25 per cubic yard. Suppose that Joe and Rebecca compete in quantities and competition in this market is described by Cournot model. What are Joe and Rebecca’s Nash equilibrium outputs? What is the resulting price? What do they each earn as profit? How does the price compare to the marginal cost? Joe and Rebecca are small-town ready-mix concrete duopolists. The market demand function is Qd = 10,000 – 100P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $25 per cubic yard. Suppose that Joe and Rebecca compete in quantities and competition in this market is described by Cournot model. What are Joe and Rebecca’s Nash equilibrium outputs? What is the resulting price? What do they each…Exercise A.2 . Sinergy and Dinaco are the only two companies in a high-tech industry. They are faced with the following matrix of results when deciding their research budget: After analizing the graph, answer the following questions... a) Does Sinergy have a dominant strategy? Reason your answer. b) Does Dinaco have a dominant strategy? Reason your answer. c) Is there a Nash equilibrium in this scenario? Reason your answer.
- Compare and contrast using a graph the oligopoly models Quasi-Competitive Model, Cartel Model, Cournot Solution Model in terms of the output produced, price charged, welfare to consumers, and associated deadweight lossesIn the Cournot oliogopoly model, firms compete by setting quantities. In class we noted that as the number of firms in the market grows very large, the outcome looks increasingly like what other model we studied? Provide intuition for your answer.In the Cournot duopoly model, each firm assumes that (select all that applies) a. Group of answer choices b. the price of its rival is fixed. c. the output of its rival is fixed. d. rivals will match price cuts but will not match price increases. e. rivals will match all reasonable price changes.
- In a Cournot model, firms Go and Stop compete by producing good X. Demand is X = 50 - 0.5P, where P is price. The two firms have zero cost. If firm Go believes that firm Stop will produce 20 units, then firm Go's optimal reaction is produce _____ units Please do it fast ASAP .... FastThe following payoff matrix shows the possible sentence that two suspects , who are arrested on suspicion on car threft,could recieve. The suspects are intarogated seperately and are unable to communicate with one another. For the information given in the payoff matrix above: a. Is there a dominant strategy. b. What is the dominant strategy? How do you know? c. Is there a Nash equilibirium ? How do you know?You are asked to model an oligopoly market with the following characteristics: firms produce an undifferentiated product, choose quantities sequentially, and let the market determine the price. Which oligopoly model would best predict actual behavior in this market?
- Olivia is thinking about opening a new bakery (the entrant). There is already a bakery open in her neighborhood (the incumbent), and the owner of the incumbent bakery makes it clear that if Olivia enters the market, they will cut their prices in an attempt to drive the new bakery out of business. Based on the payoff matrix below, is the incumbent’s threat credible? That is, if Olivia opens a new bakery, will the incumbent actually lower their prices? Note: the entrant chooses the row, the incumbent chooses the column High price Low price Enter 1, 2 -1, 1 Don’t enter 0, 10 0, 1 a. Yes, the threat is credible b. No, the threat is not credibleExercise A.4Explain and graphically represent the equilibria of the Cournot and Bertrand duopoly models. Indicate if they are Nash equilibria and why. Reason your answer.Consider the following Cournot model. • The inverse demand function is given by p = 30 –Q, where Q = q1 + q2. • Firm 1’s marginal cost is $6 (c1 = 6). Firm 2 uses a new technology so that its marginal cost is $3 (c2 = 3). There is no fixed cost. • The two firms choose their quantities simultaneously and compete only once. (So it’s a one-shot simultaneous game.) d. Suppose there is a market for the technology used by Firm 2. What is the highest price that Firm 1 is willing to pay for this new technology? e. Now let’s change the setup from Cournot competition to Bertrand competition, while maintaining all other assumptions. What is the equilibrium price? f. Suppose the two firms engage in Bertrand competition. What is the highest price that Firm 1 is willing to pay for the new technology?
