EBK MICROECONOMICS
2nd Edition
ISBN: 9780134458496
Author: List
Publisher: VST
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Question
Chapter 13, Problem 7Q
To determine
Distinguish between a strategy that is pure and a strategy that is mixed.
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what is the difference between nash equilibrium and dominated strategy?
What is the difference between Dominant strategy and mixed strategy? Please explain
In a small town there are two pizza restaurants . If neither restaurant advertises, its
revenue will not change. If only one firm advertises, the firm that advertises will
double its revenue and the firm that doesn't advertise will see a decrease in its
revenue, but if both firms advertise, their revenue will not change. What outcome
would be predicted by game theory in this market?
Both restaurants will advertise.
Game theory would predict chat sometimes one restaurant would advertise, and
the rest of the time both will advertise.
Neither restaurant will advertise
Game theory is only a theory and cannot predict real-world events.
One restaurant will advertise.
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- Rock-paper-scissors is a game in which players typically use mixed strategies. Can you think of other examples? What are some of the characteristics of games that usually involve playing mixed strategies?arrow_forwardAccording to game theory, what do firms try to do? maximize their profits by acting in ways to minimize damage from competitors capture competitors markets by developing slightly differentiated products gain market shares through predatory pricing maximize market share through strategic advertising and product placementarrow_forwardHow expected Nash Equilibrium would be achieved in case of game with no Nash Equilibrium?arrow_forward
- Explain what is Game Theory and give an example of strategic games.arrow_forwardEconomics Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not then the firm that offers the discount will increase its profit. The figure shows the payoff matrix for this game. Alpha Offer Don't offer Alpha eams S60,000 Alpha eams $20,000 What is the Nash equilibrium in this game? Offer Bota earns $60,000 Bota earns $100.000 O A. There is no Nash equilibrium Beta Alpha earns $100.000 Alpha earms $80,000 O B. Beta offers a student discount but Alpha does not Don't OC. Both Alpha and Beta offer a student discount Beta eams $20,000 Beta earns $80,000 offer O D. Alpha offers a student discount but Beta does notarrow_forwardSuppose Proctor & Gamble (PG) and Johnson & Johnson (JNJ) are simultaneously considering new advertising campaigns. Each firm may choose a high, medium or low level of advertising. a. What are each firm’s best responses to its rival’s strategies? b. Does either firm have a dominant strategy? c. What is the Nash equilibrium in this game?arrow_forward
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