Two firms face decisions with two alternatives that can be modeled using Game Theory. For each of the situations described below, CIRCLE the ("Nash") equilibrium (or equilibria) for the "game" given the profit payouts (firm 1, firm 2) for the choices for the firms (or mark "None"). a. Sell One Medium-Size Item or Sell One Large Item and One Small Item Firm 1 Choices Firm 2 Choices Medium-Size Item Large and Small Items Medium-Size Item 31,27 25, 33 Large/Small Items 42,24 30,28 b. Use "9" Price Endings or Use "5" Price Endings Firm 2 Choices Use "9" Price Endings | Use "5" Price Endings Firm 1 Choices Use "9" Endings Use "5" Endings 45,28 42,30 c. Hire a Celebrity Endorser or Donate to Charity 27,25 25,28 Firm 2 Choices Firm 1 Choices Hire Celebrity Endorser Donate to Charity Celebrity Endorser 40, 29 30, 33 Donate to Charity 37,36 48, 32 d. Locate Downtown or Locate in Suburban Strip Mall Firm 2 Choices Firm 1 Choices Locate Downtown Locate in Strip Mall Locate Downtown 32,31 28, 34 Locate in Strip Mall | 36,22 30,25
Two firms face decisions with two alternatives that can be modeled using Game Theory. For each of the situations described below, CIRCLE the ("Nash") equilibrium (or equilibria) for the "game" given the profit payouts (firm 1, firm 2) for the choices for the firms (or mark "None"). a. Sell One Medium-Size Item or Sell One Large Item and One Small Item Firm 1 Choices Firm 2 Choices Medium-Size Item Large and Small Items Medium-Size Item 31,27 25, 33 Large/Small Items 42,24 30,28 b. Use "9" Price Endings or Use "5" Price Endings Firm 2 Choices Use "9" Price Endings | Use "5" Price Endings Firm 1 Choices Use "9" Endings Use "5" Endings 45,28 42,30 c. Hire a Celebrity Endorser or Donate to Charity 27,25 25,28 Firm 2 Choices Firm 1 Choices Hire Celebrity Endorser Donate to Charity Celebrity Endorser 40, 29 30, 33 Donate to Charity 37,36 48, 32 d. Locate Downtown or Locate in Suburban Strip Mall Firm 2 Choices Firm 1 Choices Locate Downtown Locate in Strip Mall Locate Downtown 32,31 28, 34 Locate in Strip Mall | 36,22 30,25
Chapter15: Imperfect Competition
Section: Chapter Questions
Problem 15.7P
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Transcribed Image Text:Two firms face decisions with two alternatives that can be modeled using Game Theory. For each
of the situations described below, CIRCLE the ("Nash") equilibrium (or equilibria) for the
"game" given the profit payouts (firm 1, firm 2) for the choices for the firms (or mark "None").
a. Sell One Medium-Size Item or Sell One Large Item and One Small Item
Firm 1 Choices
Firm 2 Choices
Medium-Size Item
Large and Small Items
Medium-Size Item
31,27
25, 33
Large/Small Items
42,24
30,28
b. Use "9" Price Endings or Use "5" Price Endings
Firm 2 Choices
Use "9" Price Endings | Use "5" Price Endings
Firm 1 Choices
Use "9" Endings
Use "5" Endings
45,28
42,30
c. Hire a Celebrity Endorser or Donate to Charity
27,25
25,28
Firm 2 Choices
Firm 1 Choices
Hire Celebrity Endorser
Donate to Charity
Celebrity Endorser
40, 29
30, 33
Donate to Charity
37,36
48, 32
d. Locate Downtown or Locate in Suburban Strip Mall
Firm 2 Choices
Firm 1 Choices
Locate Downtown
Locate in Strip Mall
Locate Downtown
32,31
28, 34
Locate in Strip Mall |
36,22
30,25
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