Study Guide for Microeconomics
9th Edition
ISBN: 9780134741123
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 12, Problem 11E
(a)
To determine
Price, output and profit at Nash Equilibrium.
(b)
To determine
Price, output and profit when the firm 1 sets the price first.
(c)
To determine
Price setting strategy of the two firms.
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American Airlines and Braniff Airways are the two airlines operating flights from your region. Suppose that each company can charge either a high price for tickets or a low price. First, American Airlines will choose the price level. Following this, Braniff Airways will observe its competitor’s decision and choose the price level for its tickets. If both of the companies choose High, they earn $25,000 each. If they both choose Low, they earn $18,000 each. If the companies choose different levels of prices, the one choosing the high price will earn $15,000 and the one choosing Low will earn $30,000.
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Chapter 12 Solutions
Study Guide for Microeconomics
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