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: Cengage Learning
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Chapter 13, Problem 1.1CE
To determine
To describe:The reason for Airbus go ahead
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Chapter 13 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- Which of the following is FALSE for the grim trigger strategy and the infinite horizon repeated Prisoner's Dilemma game illustrated above? A. In the grim trigger strategy profile, if a player chooses D in a period, then both players chooses D forever after that period B. The threshold discount factor for sustaining cooperation under grim trigger strategy depends on the utility numbers in the stage game C. If all utility numbers remain the same but 3 is replaced by 5 in the stage game, then cooperation CANNOT be sustained in this game for all possible values of the discount factor.arrow_forwardAnswer the following question using the attached payoff matrix 1. Is there a Prisoners Dilemma in any of the quadrants? If so, explain how do you know by showing your understanding of a Prisoner's Dilemma. If not, explain why not.arrow_forwardThe US and Canada have overfished North Atlantic cod stocks nearly to the point of extinction. Both countries wish to preserve the cod industry (and hence the cod stocks), so the two countries sign an agreement to limit fish hauls. Each country has two possible strategies: comply with the agreement (limit fishing) or renege on the agreement (overfish). Each country’s payoffs for different strategy combinations are given in the matrix below. The numbers in the cells represent utilities, and the payoff ordering is (US, Canada). QUESTIONS: 1.If this is a one-shot game (i.e., it is played once), do the players have a dominant strategy? If so, what is it? Briefly explain your answer. 2.What is the equilibrium of this game? Is it Pareto-optimal? How do you know?arrow_forward
- Two firms are playing an infinitely-repeated prisoner's dilemma pricing game of the following form: Firm 1 Firm 2 Low price High Price Low price 4, 4 20, 0 High price 0, 20 12,12 Consider the decision to cheat ONLY ONCE for a firm in this game against the opponent that is a Tit-for-Tat player. Cheating firm gets an extra in payoffs for the first round, but has to face $0 payoffs for the second round in order to be able to bring the opponent to the collusive outcome again in the third round. What is the minimum rate of return (r) that would make defecting only once? Show your calculations.arrow_forwardSuppose that two companies – AlphaTech and BetaLabs – are competing for market share and must simultaneously decide whether to develop a new product. Both companies are reluctant to make a decision as it is only economical for one company to develop a new product. Each company earns nothing if they decide not to develop a new product. One company can earn $50 million by developing a new product only if their competitor does not. If both companies decide to develop a new product, they each lose $10 million. Complete the payoff matrix to represent this game. Based on your solution in part (a), determine the maximin solution.arrow_forwardWhat is the payoff to player 2 under the strategy profile (AK,D,FL) in this game?What is the payoff to player 3 under the strategy profile (BK,C,FM) in this game?arrow_forward
- Two players, Player 1 and Player 2, are playing a repeated prisoner’s dilemma. Payoffs are described in the following matrix. Answer which statement is correct: Select one: a. A trigger strategy will never support (A,A) as an equilibrium b. A tit-for-tat strategy will never support (A,A) as an equilibrium c. A tit-for-tat strategy will support (A,A) as an equilibrium if δ > 0.7 d. A trigger strategy will support (A,A) as an equilibrium if δ > 0.7arrow_forwardIs the solution to the prisoner’s dilemma game a Nash equilibrium? Why? The solution to the prisoner’s dilemma game is a Nash equilibrium because no player can improve his or her payoff by changing strategy unilaterally. The solution to the prisoner’s dilemma game is not a Nash equilibrium because players do not end up in the best combination for both. The solution to the prisoner’s dilemma game is not a Nash equilibrium because both players can improve their payoffs by cooperating. The solution to the prisoner’s dilemma game is a Nash equilibrium because it is a noncooperative game in which both players have to expect that the other is purely selfish.arrow_forwardAnalyze the pure Nash equilibrium and mixed Nash equilibrium strategies in the following manufacturer–distributor coordination game. How would you recommend restructuring the game to secure higher expected profit for the manufacturer?arrow_forward
- Intel and Applied Micro devices are the 2 major producers of CPU chips used in personal computers. They can each research and enhance their Chips computational speed, reduce their power consumption, or enhance their graphics ability. The economic profit depends on each company's choice of which attribute to research. The payoff matrix shows each firms hypothetical economic profit for all possible choices. What is the Nash equilibrium of this game? Explain the answerarrow_forwardDetermine how much you would be willing to pay for the privilege of moving first in these two different games*1 1. There are two players, you and a rival. The player announcing the larger positive integer gets a payoff of $10, while the other player gets $0. 2. There are two players, you and a rival. The player announcing the smaller positive integer gets a payoff of $20, while the other player gets $2.arrow_forwardConsider the infinitely repeated version of the symmetric two-player stagegame in the following figure. The first number in a cell is player 1’s singleperiod payoff. Assume that past actions are common knowledge. Each player’s payoff is the present value of the stream of single-period payoffs, where the discount factor is δi for player i.a. Define a grim-trigger strategy profile.b. Derive conditions whereby the strategy profile in (a) is a SPNE.arrow_forward
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