Suppose initially there are 22 Cournot competitors in a market, each producing an identical good at the same constant marginal cost. In class we showed that a merger is profitable if the fraction of firms in the market that merge, denoted by a, is greater than a(N) where a(N) = (3 + 2N - V(5 + 4N))/2N %3D What is the minimum number of firms that need to merge for a merger to be profitable in this case? O a. 17 O b. 15 O. 18 Od. 19

Suppose initially there are 22 Cournot competitors in a market, each producing an identical good at the same constant marginal cost. In class we showed that a merger is profitable if the fraction of firms in the market that merge, denoted by a, is greater than a(N) where a(N) = (3 + 2N - V(5 + 4N))/2N %3D What is the minimum number of firms that need to merge for a merger to be profitable in this case? O a. 17 O b. 15 O. 18 Od. 19

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 15P

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Each of 3 companies are considering entry into a new market. The cost of entry is 30. If only one company enters, then its gross profit is 200. If more than one company enters, then each entrant earns a gross profit of 40. The payoff to a company that enters is its gross profit minus its entry cost, while the payoff to a company that does not enter is 60. This implies that if all companies enter the market their payoffs are 10 while if all of them stays out their payoffs are 60. If only one company enters the market its payoff is 170 (while the other two companies’ payoffs are 60). If two companies enter the market their payoffs are 10. Problem Set 2 Due Sunday October 3rd You can discuss the problem set with your classmates, but you are required to submit your independent answers. a) Find all pure strategy Nash equilibria of the game. b) Can you find a mixed strategy Nash equilibrium such that exactly one company plays mixed strategy? If yes, what is it? c) Can you find a mixed…
Suppose there are N identical firms in a market where the maximum total profit is 12. Assuming an infinite game, if the firms fully cooperate, each would get 12/N in profit. If one firm cheats, it gets the entire market profit for one period, followed by a profit of 1 in all future periods, The discount rate r is .33. How large can N be and still sustain cooperation? That is, how many firms can there be before cooperation breaks down?
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…
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Explain all will rate what is always true for a pure nash equilibrium of a two-person non zero-sum game A.No player can improve his payoff with a unilateral change of strategy B. it is a Pareto maximum of the payoff matrix C. No player can worsen the payoff of his opponent with a unilateral change of strategy D. It gives worse payoffs to both players than any berge equilibrium
a Firm A and Firm B decide to launch their new products in the market. Each firm can choose to either sell the product at a high price (H) or a low price (L). The estimated payoff table is as follows: Firm B L H Firm A L (250, 150) (280, 130) H (140, 180) (270, 190) (Firm A's payoff is given before the comma, and Firm B's payoff is given after the comma.) i What are the dominant strategies (if any) for Firm A and Firm B respectively? ii What is the Nash equilibrium outcome, if any? Explain. ( iii If Firm A can decide on what strategy to use first, what will be the Nash equilibrium (if any) of this sequential game? Explain with the aid of a tree diagram. b Explain why the market of health insurance is less efficient with the presence of asymmetric information. (Assume the insured knows more about his/her health condition than the insurance provider.)
If you advertise and your rival advertises, you each will earn $4 million in profits. If neither of you advertises, 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 $1 million and the non-advertising firm will earn $5 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is Group of answer choices for each firm to advertise. for neither firm to advertise. for your firm to advertise and the other not to advertise. none of the provided answers. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.