EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 13.A, Problem 2ARQ
To determine
Evaluate the statement whether it is true or false.
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Wal-Mart's dominant strategy is to pick a price of $.
Target
Price = $30
Price = $17
%3D
What is the Nash equilibrium for this game?
$6,000
$1,500
O A. The Nash equilibrium is for Target to choose a price of $17 and Wal-Mart to choose
a price of $30.
Price = $30
$6,000
$11,000
O B. The Nash equilibrium is for Target and Wal-Mart to both choose a price of $30.
Wal - Mart
C. The Nash equilibrium is for Target to choose a price of $30 and Wal-Mart to choose
a price of $17.
$11,000
$4,500
Price = $17
%3D
$1,500
$4,500
O D. The Nash equilibrium is for Target and Wal-Mart to both choose a price of $17.
South
OE.
O E. A Nash equilibrium does not exist for this game.
8. Suppose there are two firms (Fr and F2) producing identical product competing for
20
market share and each of which would like to dominate the other, if possible. They
faced a choice between defending and cooperating. When either defends or bou
cooperate, neither is able to dominate the other. Assuming these preferences are reflected
in their profit pay-offs. If both the players choice to defend, their profit will be 1.500
each. When one Firm defends and the other cooperates their profit level will be 5.000 an
1.000 respectively. Similarly, when both cooperate they end up with profit level of 3.000
each. With this in mind:
a. Represent the above game in normal form/strategic form.
b. Identify the dominant strategy for both firms and the dominant strategy equilibrium.
c. Is the above equilibrium Nash equilibrium? Is it Pareto efficient allocation? Why?
d. Assuming the game is one-shoot game and Firm 1 moves first represent it in extended
form
2. Consider the following game. Assume that this game is played simultaneously and without collusion. The two companies are choosing between two strategies: go international or stay national. The outcomes of each strategy for each company are given the following payoff matrix:
a) Find Nash equilibrium in this game. Interpret the equilibrium you found.
b) What is the Chipco's dominant strategy, if it has one? How shall Chipco's payoffs change for it to not have a dominant strategy anymore?
Chapter 13 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
Ch. 13.1 - Prob. 1QQCh. 13.1 - Prob. 2QQCh. 13.1 - Prob. 3QQCh. 13.1 - Prob. 4QQCh. 13.4 - Prob. 1QQCh. 13.4 - The D2e segment of the demand curve D2eD1 graph...Ch. 13.4 - Prob. 3QQCh. 13.4 - Prob. 4QQCh. 13.A - Prob. 1ADQCh. 13.A - Prob. 2ADQ
Ch. 13.A - Prob. 3ADQCh. 13.A - Prob. 4ADQCh. 13.A - Prob. 1ARQCh. 13.A - Prob. 2ARQCh. 13.A - Prob. 3ARQCh. 13.A - Prob. 1APCh. 13.A - Prob. 2APCh. 13 - Prob. 1DQCh. 13 - Prob. 2DQCh. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - Prob. 10DQCh. 13 - Prob. 11DQCh. 13 - Prob. 12DQCh. 13 - Prob. 13DQCh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3P
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- Economics How would the Coumot equilibrium change in the airine example if American's marginal cost were $100 and United's were $2007 The demand the duopoly quantity-setting firms face is Q- 339 -p with an inverse demand function of p- 339-19A1qu- where qa is the quantity produced by American and qu is the quantity produced by United. The Cournot-Nash equilibrium occurs where qa equals and qu equals (enter numeric responses using integers)arrow_forward5. The following represents the payoffs in a one period game in prices HI and LO. A HI LOW B HI (100, 100) (200,0) LOW (0, 200) (50, 50) (a) If A and B were playing this game only once, what strategy should A choose, and why? (b) A and B are playing the same game an infinite number of times and each has a discount rate of 50% (.50). Firm B adopts a trigger strategy and selects HI in the first round. What would be A's present value of profits from cooperation (HI)? What would be its present value from cheating (LO)? Would A choose to cooperate or cheat?arrow_forwardNewfoundland’s fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4 Model this situation as a prisoner’s dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement. Provide another environmental example of a prisoner’s dilemma. In many potential prisoner’s dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail- able in many situations involving degradation of the environment.arrow_forward
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