Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 13, Problem 13P
(a)
To determine
The pay-off matrix of a game between two firms.
(b)
To determine
The Nash
(c)
To determine
The existence of a first mover advantage in the quantity-game.
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Students have asked these similar questions
Two competing firms must choose their quantity of production simultaneously. Each firm can choose either a High quantity of 3 or a Low quantity of 2. The price for both firms is 9-Q, where Q is the sum of both their quantities. Costs are zero; the profit is simply price times quantity. For example, if firm 1 chooses High and firm 2 chooses Low, then price is 9-(3+2)=4; payoff for firm 1 is 12 while payoff for firm 2 is 8.
What is the unique Nash equilibrium?
(Firm 1's strategy will be written before firm 2's.)
Suppose that Flashfry and Warmbreeze are the only two firms in a hypothetical market that produce and sell air fryers. The following payoff matrix gives profit scenarios for each company (in millions of dollars), depending on whether it chooses to set a high or low price for fryers.
Warmbreeze Pricing
High
Low
Flashfry Pricing
High
11, 11
2, 15
Low
15, 2
8, 8
For example, the lower-left cell shows that if Flashfry prices low and Warmbreeze prices high, Flashfry will earn a profit of $15 million, and Warmbreeze will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfry and Warmbreeze are both profit-maximizing firms.
If Flashfry prices high, Warmbreeze will make more profit if it chooses a price, and if Flashfry prices low, Warmbreeze will make more profit if it chooses a price.
If Warmbreeze prices high, Flashfry will make more profit if it chooses a price, and if Warmbreeze prices low, Flashfry will make more profit if…
Alice chooses action a or action b, and her choice is observed by Bob. If Alice chooses action a, then Alice receives a payoff of 5 and Bob receives a payoff of 4. If Alice chooses action b, then Bob chooses action c or action d. If Bob chooses action c, then Alice receives a payoff of 10 and Bob receives a payoff of 5. If Bob chooses action d, then Alice receives a payoff of 0 and Bob receives a payoff of 6.
Which of the following are correct statements about the game described in the previous paragraph? (Mark all that are correct.)
Alice's backward induction payoff is 10.
This is a prisoners' dilemma.
This game has imperfect information.
Alice's backward induction payoff is 0.
This is a promise game.
Bob's backward induction payoff is 4.
Bob's backward induction payoff is 6.
This is a threat game.
Chapter 13 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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