Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184890
Author: PINDYCK
Publisher: PEARSON
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Question
Chapter 13, Problem 3RQ
To determine
Nash equilibrium and dominant strategy.
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Explain the meaning of a Nash Equilibrium. How does it differ from and equilibrium in dominant strategies?
What is the difference, if any, between a dominant strategy and a Nash equilibrium? Give examples.
Define a dominant strategy and Nash equilibrium. Can two firms interacting with each other have no Nash equilibria if both have a dominant strategy?
Chapter 13 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- Little Kona is a small coffee company that is considering entering a market dominated by Big Brew. Each company’s profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price:a. Does either player in this game have a dominant strategy?b. Does your answer to part (a) help you figure out what the other player should do?c. What is the Nash equilibrium? Is there only one?d. Big Brew threatens Little Kona by saying, “If you enter, we’re going to set a low price, so you had better stay out.” Do you think Little Kona should believe the threat? Why or why not?c. If the two firms could collude and agree on how to split the total profits, what outcome would they pick?arrow_forwardFind 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.arrow_forwardFind all the Nash equilibria (in the strategic form) and the subgame perfect nash equilibria in the following game. Are they the same ?arrow_forward
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