Trick and Gear are the only two producers of flying brooms. They colluded together illegally to strict output and increase price Each firm has two strategies: Comply with the decisions or Cheat to make more profit individually. ▪ If both Comply, each firm makes $2 million a week. ▪ If both Cheat, each firm makes zero economic profit. ▪ If Trick Complies and Gear Cheats, Trick incurs a loss of $1 million and Gear makes a profit of $4.5 million. ▪ If Gear Complies and Trick Cheats, Gear incurs a loss of $1 million and Trick makes a profit of $4.5 million. Construct a payoff matrix for the game that Trick and Gear must play
Trick and Gear are the only two producers of flying brooms. They colluded together illegally to strict output and increase price Each firm has two strategies: Comply with the decisions or Cheat to make more profit individually. ▪ If both Comply, each firm makes $2 million a week. ▪ If both Cheat, each firm makes zero economic profit. ▪ If Trick Complies and Gear Cheats, Trick incurs a loss of $1 million and Gear makes a profit of $4.5 million. ▪ If Gear Complies and Trick Cheats, Gear incurs a loss of $1 million and Trick makes a profit of $4.5 million. Construct a payoff matrix for the game that Trick and Gear must play
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter13: best-practice Tactics: Game Theory
Section: Chapter Questions
Problem 3E
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Trick and Gear are the only two producers of flying brooms. They
colluded together illegally to strict output and increase price Each
firm has two strategies: Comply with the decisions or Cheat to make
more profit individually.
▪ If both Comply, each firm makes $2 million a week.
▪ If both Cheat, each firm makes zero economic profit.
▪ If Trick Complies and Gear Cheats, Trick incurs a loss
of $1 million and Gear makes a profit of $4.5 million.
▪ If Gear Complies and Trick Cheats, Gear incurs a loss
of $1 million and Trick makes a profit of $4.5 million.
Construct a payoff matrix for the game that Trick and Gear must
play
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