Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134643175
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 13, Problem 7RQ
To determine
Promising to announce a high
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Consider the following entry-deterrence game. A potential entrant has two strategies, “Enter” or “Stay Out”. An incumbent firm can either Price Low or Price High, depending on whether they want to try to fight or accommodate the entrant. (The Price Low option could be a limit price, for example). Suppose if the entrant Enters and the incumbent Prices Low, both firms lose $-1M. If the entrant enters and the incumbent Prices High, each firm earns $2M. If the Entrant doesn’t enter, the incumbent earns $4M and the entrant earns $0.
a)Using the concept of Nash Equilibrium, what are the predicted strategies and profits? Set up a game box or tree and explain your reasoning.
b) Give an example of a different profit outcome that would lead to a different Nash Equilibrium. (From this, you can see that sometimes deterrence is effective and sometimes it isn’t, depending on the profits).
Boeing and Airbus are the two primary producers of passenger aircraft. Both firms are preparing to announce their new long-distance jets. Each firm can design their plan to maximize comfort or the number of seats. If both firms choose to maximize the same characteristic they will sell 100 planes each and if they maximize different characteristics they will each sell 150 planes each. Both firms want to maximize sales.
Draw a game tree and find the equilibrium strategies and payoffs. Show your work.
Two roommates John and Joe are playing a simultaneous game of cleaning the apartment. If neither of them clean, the apartment gets filthy and both get a utility of 2. If John cleans and Joe doesn’t, John gets a utility of 1 and Joe gets a utility of 4. If Joe cleans and John doesn’t, Joe gets a utility of 1 and John gets a utility of 4 and if both clean up the apartment, they each get a utility of 3.What is the Nash equilibrium of this game?
Group of answer choices
Joe cleans, John doesn’t
John cleans, Joe doesn’t
Both of them clean the apartment
Neither of them clean the apartment
Chapter 13 Solutions
Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)
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