Which one of the following statements is correct? A. The Bertrand model must be wrong because there exists a Nash equilibrium for the Cournot model. B. The Cournot model must be wrong because there exists a Nash equlibrium for the Bertrand model. C. The result which is referred to as the "Bertrand paradox" cannot be a Nash equilibrium outcome. D. The result which is referred to as the "Bertrand paradox" is nevertheless a Nash equilibrium outcome

Which one of the following statements is correct? A. The Bertrand model must be wrong because there exists a Nash equilibrium for the Cournot model. B. The Cournot model must be wrong because there exists a Nash equlibrium for the Bertrand model. C. The result which is referred to as the "Bertrand paradox" cannot be a Nash equilibrium outcome. D. The result which is referred to as the "Bertrand paradox" is nevertheless a Nash equilibrium outcome

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.3P

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True or false? If a game has a Nash equilibrium, that equilibrium will be the equilibrium that we expect to observe in the real world. False. People don’t always act in the way that a Nash equilibrium requires. People don’t always make the necessary calculations and they take into account the outcome of others. False. A Nash equilibrium is based on very strict assumptions that rarely hold in the real world. No real-world situation leads to a Nash equilibrium. True. As long as people are rational and have their own self-interest at heart, real-life games will result in the Nash equilibrium. True. Nash’s theory of equilibrium outcomes was derived from real-world interactions. The theory holds true for almost all real-world scenarios.
Which of one the following statements is correct? A. The Cournot model is simply wrong because in the real world firms do make pricing decisions. B. Only the Bertrand model can be right because in the real world firms do make pricing decisions. C. The Cournot model can be justified as a reduced form of a dynamic game in which firms make decisions on quantities, which are followed by pricing decisions. D. The Cournot model are justified because in all real world markets there are auctioneers who play the function of clearing the markets.
Jane and Sara are competing orange juice salespersons in Amherst. Their stands are next to each other on a street and consumers regard them as identical. The marginal cost of an orange juice is $1. The demand for orange juice every hour is Q = 20 − P where P is the lowest price between the two salespersons. If their prices are equal they split demand equally. a. If they set prices simultaneously (prices can be any real number), what is the Nash equilibrium price? b. If, against what we have assumed in class, orange juice salespersons have to charge prices in whole dollars ($1, $2, $3, etc), what are the Nash equilibrium prices? c. Assuming whole dollar pricing, if Jane sets her price before Sara, what price would she charge? Answer all 3 parts
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.) Answer the following questions. (4points)DeriveFirm1andFirm2’sreactionfunctions, respectively. (2 points) Solve the Nash equilibrium (q1N, q2N). (2points)Whatistheequilibriumpriceandwhatistheprofitlevel for each firm? (3 points) 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? (3points)Nowlet’schangethesetupfromCournotcompetitionto Bertrand competition, while maintaining all other assumptions. What is the equilibrium price? (3 points) Suppose the two firms engage in Bertrand competition. What is the highest price that…
Which of the following is FALSE for the Bayesian Nash equilibrium of a Bayesian game? A. Every Bayesian game in which there are finitely many players and finitely many actions and types for each player, there exists a Bayesian Nash equilibrium B. Every Bayesian game has multiple Bayesian Nash equilibria C. Bayesian Nash equilibrium of a Bayesian game is the Nash equilibrium of its associated ex-ante normal form game
Which of the following statements about a Nash equilibrium is not correct? A. Each player plays a best response to opponents' Nash strategies. B. No player has a profitable unilateral deviation. C. For each finite noncoopertiave game there always exists a pure strategy Nash equilibrium. D. A game has at least two players. Which one of the following statements is incorrect? A. For dynamic games with complete information, not all subgame perfect Nash equilibrium points can be found by backward induction. B. A finite dynamic game with complete information may also have a normal form representation. C. A finite static game with complete information may not have a pure strategy Nash equilibrium. D. A finite static game with complete information cannot have an extensive form representation. Which one of the following statements is correct? A. A supergame cannot have any subgame perfect Nash equilibrium. B. A supergame can only have finite number of subgame perfect Nash…
This is from economics NASH EQUILIBRIUM
Which one of the following statements about the (modified) Stackleberg model is incorrect? A. Firm 1's move is a strategic move. B. Firm 2's move is a strategic move. C. It is can be solved by backward induction. D. It is a dynamic game.
Answer the following question using the attached payoff matrix 1. Is there a Nash Equilibrium in any of the quadrants? If so, explain how do you know by showing your understanding of a Nash Equilibrium. If not, explain why not.
Assume M's monetary weight equals $4. The monetary weight for 1, and 1, is $2 each; the monetary weight for I, and 1, and is $3 each. Where, if any, is the Nash Equilibrium?
Explain the difference between a Bayesian-Nash Equilibrium and a Nash Equilibrium.
Find any Nash equilibria in the game below. Firm B Co-operate Don’t co-operate Firm A Co-operate 60 60 0 80 Don’t co-operate 80 0 10 10 Answer a. There is one Nash equilibrium: both firms don't co-operate. b. There are no Nash equilibria. c. There are two Nash equilibria: one firm co-operates and the other firm doesn't co-operate. d. There are two Nash equilibria: (i) both firms co-operate and (ii) both firms don't co-operate.

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	A.	The Bertrand model must be wrong because there exists a Nash equilibrium for the Cournot model.
	B.	The Cournot model must be wrong because there exists a Nash equlibrium for the Bertrand model.
	C.	The result which is referred to as the "Bertrand paradox" cannot be a Nash equilibrium outcome.
	D.	The result which is referred to as the "Bertrand paradox" is nevertheless a Nash equilibrium outcome.