EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 13, Problem 11SP
To determine
Dominant strategy and the BBT show.
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When we say that firms within an oligopoly structure have the temptation to "cheat" in order to gain profits, this means they
What is the prisoners dilemma, and what does it have to do with oligopoly?
What happens if either formally or informally, oligopoly firms work together and hold to their agreements?
Group of answer choices
Profits can be maximized by increasing output and increasing the price of goods and services.
Profits can be minimized by decreasing output and increasing the price of goods and services.
Profits can be maximized by decreasing output and increasing the price of goods and services.
Chapter 13 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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- Use the following normal-form game to answer the following questions. a. For what values of x is strategy D (strictly) dominant for player 2? b. For what values of x is strategy B (strictly) dominant for player 1? c. For what values of x is (B, D) the only Nash equilibrium of the game?arrow_forwardAccording to oligopoly game theory, what happens to firm As and firm Bs profits if firm A sets a low price and firm B sets a high price?arrow_forwardCan you explain what the Pure Coordination Game is and provide an example of one?arrow_forward
- Consider a simple example of a payoff matrix in the context of a trade dispute between two countries, Country A and Country B. In this scenario, both countries can either choose to impose tariffs (T) or not impose tariffs (N) on each other's exports. The payoffs that each country experiences are based on the chosen strategies and are presented below. (a) Does Country A and B have a dominant strategy? If so, specify its dominant strategy and explain your answer clearly.(b) What is the Nash equilibrium. Explain your answer clearly.(c) Suppose now the trade dispute is played sequentially, with Country B moving first. Represent the trade dispute in and extensive form.(d) Is this trade dispute a prisoner's dilemma game? Explain your answer.arrow_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_forwardEconomists believe that oligopoly firms have a kinked demand curve. Explain why the oligopoly demand curve has a kink.arrow_forward
- Consider the following dynamic game: Find the subgame perfect Nash Equilibrium Identify the non-credible threat equilibriumarrow_forwardWhich is the best example of an oligopoly?arrow_forwardWhy would a firm in oligopoly market structure find game theory a useful tool to employ when making decisions?arrow_forward
- In the collusion game, collusion was only sustainable in the infinite horizon repeated game. One Nash Equilibrium of that game can be found when all players play a “grim trigger” strategy, where they collude until an opponent chooses to compete, and then compete for all future rounds as a punishment. In such a game, if the one period bonus that comes from competing is low enough, firms always collude and the punishment is never triggered. Is the punishment (vowing to compete forever after one deviates) realistic, especially if firms can communicate freely? Why or why not? (Hint: Is a grim trigger Nash Equilibrium a Subgame Perfect Nash Equilibrium? What kinds of Nash Equilibria does Subgame erfection rule out in sequential games?)arrow_forwardUse the following normal-form game to answer the following question. Player 2 Player 1 Strategy C D A 30,30 70,0 B 0,70 60,60 Identify the one-shot equilibrium Suppose the players know this game will be repeated three times. Can they achieve payoffs that are better than the one-shot game Nash Equilibrium? Explain. Suppose the game is infinitely repeated and the interest rate is 6%. Can the player achieve payoffs that are better than the one-shot game equilibrium? Explain.arrow_forwardHow can a kinked demand curve indicate that the firms in the oligopoly will continue to behave as a cartel and not have an incentive to deviate from the cartel? If the firms in the oligopoly collude to restrict output, the firms implicitly agree to increase prices if a firm in the oligopoly increases prices. If the firms in the oligopoly collude to restrict output, the firms implicitly agree to cut prices if a firm in the oligopoly cuts prices. If the firms in the oligopoly collude to restrict output, the firms implicitly agree to cut the quantity produced if a firm in the oligopoly cut prices. If the firms in the oligopoly collude to restrict output, the firms implicitly agree to increase quantity if a firm in the oligopoly increases prices.arrow_forward
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