MICROECONOMICS W/CONNECT >IC<
20th Edition
ISBN: 9781259890031
Author: McConnell
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 13.A, Problem 2ARQ
To determine
Evaluate the statement whether it is true or false.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose that there are two firms in a market, firm 1 and firm 2. The marketis declining in size. The game starts in period 0, and the firms can compete in periods 0, 1,2, 3, ... (i.e., indefinitely) if they so choose. Duopoly profits in period t for firm 1 are equalto 105 −10t, and they are 10.5 −t for firm 2. Monopoly profits (those if a firm is the onlyone left in the market) are 510 −25t for firm 1 and 51 −2t for firm 2. At the start of eachperiod, each firm must decide either to “stay in” or “exit” if it is still active (they do sosimultaneously if both are still active). Once a firm exits, it is out of the market forever andearns zero in each period thereafter. Firms maximize their (undiscounted) sum of profits.What is this game’s subgame perfect Nash equilibrium?
q52
If you advertise and your rival advertises, you each will earn 14 million in profits. If neither of you advertises, you will each earn 20 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn 10 million and the non-advertising firm will earn 16 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is
a. for each firm to advertise.
b. for the other firm to advertise and your firm not to advertise.
c. for your firm to advertise and the other not to advertise.
d. for neither firm to advertise.
Use the following payoff matrix to answer the following questions. (LO2)
Player 2
Strategies C D Player 1 A −10, −10 200, −100
B −100, 220 140, 180cSuppose this is a one-shot game:
a. Determine the dominant strategy for each player. If such strategies do not exist, explain why not.
b. Determine the secure strategy for each player. If such strategies do not exist, explain why not.
c. Determine the Nash equilibrium of this game. If such an equilibrium does not exist, explain why not.
Chapter 13 Solutions
MICROECONOMICS W/CONNECT >IC<
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 in 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
Knowledge Booster
Similar questions
- Suppose Toyota and Honda must decide whether to make a new kind of side-impact airbags standard equipment on all models. Side impact-airbags raise the price of each automobile by $1000. If both firms make side-impact airbags standard equipment, each company will earn profits of $2.5 billion. If neither company adopts the side-impact airbag technology, each company will earn $1 billion (due to lost sales to other automakers). If one company adopts the technology as standard equipment and the other does not, the adopting company will earn a profit of $3 billion and the other company will lose $1.5 billion. If you were a decision maker at Honda, would you make side-impact airbags standard equipment?arrow_forwardNewfoundland’s fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4 Model this situation as a prisoner’s dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement. Provide another environmental example of a prisoner’s dilemma. In many potential prisoner’s dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail- able in many situations involving degradation of the environment.arrow_forward3. Describe some interaction your company has with another entity (firms producing complementary or substitute products, upstream sup- pliers, or downstream customers), or between internal divisions within your firm that can be described as a sequential or simultaneous game. Diagram the strategies, players, and compute payoffs as best you can. Compute the Nash equilibria. What can you do to change the rules of the game to your advantage? Compute the profit consequences of your advice.arrow_forward
- What is the distinguishing characteristics of oligopoly in relation to the other forms of the other market organizations? What is its significance? In which sector of the USA economy is oligopoly most relevant?An oligopolistic firm from the telecommunication industry in USA follows demand-and-cost situation in 2009.Price in USD($) Quantity Total cost20 7 3619 8 4518 9 5417 10 6316 11 7215 12 81i. How much output should the oligopolistic produce? What price should it charge and what is the maximum profit can this firm earns?arrow_forwardSuppose that U.S.-based Qualcomm and European-based T-Mobile are contemplating infrastructure investments in a developing mobile telephone market. Qualcomm currently uses a code-division multiple access (CDMA) technology, which almost 67 million users in the United States utilize. In contrast, T-Mobile uses a global systems for mobile communication (GSM) technology that has become the standard in Europe and Asia. Each company must (simultaneously and independently) decide which of these two technologies to introduce in the new market. Qualcomm estimates that it will cost $1.2 billion to install its CDMA technology and $2.0 billion to install GSM technology. T-Mobile’s projected cost of installing GSM technology is $1.1 billion, while the cost of installing the CDMA technology is $2.7 billion. As shown in the accompanying table, each company’s projected revenues depend not only on the technology it adopts, but also on that adopted by its rival. Determine the Nash equilibrium/equilibria…arrow_forwardSuppose that U.S.-based Qualcomm and European-based T-Mobile are contemplating infrastructure investments in a developing mobile telephone market. Qualcomm currently uses a code-division multiple access (CDMA) technology, which almost 67 million users in the United States utilize. In contrast, T-Mobile uses a global systems for mobile communication (GSM) technology that has become the standard in Europe and Asia. Each company must (simultaneously and independently) decide which of these two technologies to introduce in the new market. Qualcomm estimates that it will cost $1.2 billion to install its CDMA technology and $2.0 billion to install GSM technology. T-Mobile’s projected cost of installing GSM technology is $1.1 billion, while the cost of installing the CDMA technology is $2.7 billion. As shown in the accompanying table, each company’s projected revenues depend not only on the technology it adopts, but also on that adopted by its rival.Construct the normal form of this game.…arrow_forward
- Assume Waterland and Aquataste make a nonbinding, informal agreement that each will produce 250 gallons of water, charge $1.50 per gallon, and evenly split the profit of $750. If Aquataste reneges on the agreement and produces 350 gallons, Waterland has an incentive to renege on the agreement by producing 350 gallons because Waterland’s profits would increase to $_____ , which is better than the $312.50 Waterland would earn by sticking with the agreement. (Provide your answer to two decimal places.)arrow_forwardSuppose that U.S.-based Qualcomm and European-based T-Mobile are contemplating infrastructure investments in a developing mobile telephone market. Qualcomm presently uses a code-division multiple access (CDMA) technology, which almost 67 million users in the United States utilize. In contrast, T-Mobile uses a global systems for mobile communication (GSM) technology that has become the standard in Europe and Asia. Each company must (simultaneously and independently) decide which of these two technologies to introduce in the new market. Qualcomm estimates that it will cost $1.2 billion to install its CDMA technology and $2.0 billion to install GSM technology. T-Mobile’s projected cost of installing GSM technology is $1.1 billion, while the cost of installing the CDMA technology is $2.7 billion. As shown in the accompanying table, each company’s projected revenues depend not only on the technology it adopts, but also on that adopted by its rival:Projected Revenues for Different…arrow_forwardBased only on the knowledge that the premerger market share of two firms proposing to merge was 30 percent each, an economist working for the Justice Department was able to determine that, if approved, the postmerger HHI would increase by 1,800. How was the economist able to draw this conclusion without knowledge of the other firms’ market shares? From this information, can you devise a general rule explaining how the Herfindahl-Hirschman index is affected when exactly two firms in the market merge?arrow_forward
- Economics Consider an infinitely repeated game played between two firms with the following payoffs (firm 1 is listed first): · (250, 290) if both firms deviate · (290, 330) if both firms cooperate · (230, 370) if only firm 2 deviates · (350, 270) if only firm 1 deviates a. What probability-adjusted discount factor would ensure that Firm 1 would cooperate in a Nash equilibrium if Firm 2 applied a trigger strategy in the event that Firm 1 deviated? b. What probability-adjusted discount factor would ensure that Firm 2 would cooperate in a Nash equilibrium if Firm 1 applied a trigger strategy in the event that Firm 2 deviated?arrow_forwardSuppose Toyota and Honda must decide whether to make a new breed of side-impact airbags standard equipment on all models. Side-impact airbags raise the price of each automobile by $1,000. If both firms make side-impact airbags standard equipment, each company will earn profits of $0.5 billion. If neither company adopts the side-impact airbag technology, each company will earn $1.5 billion. If one company adopts the technology as standard equipment and the other does not, the adopting company will earn a profit of $2 billion and the other company will earn $-1 billion.If you were a decision maker at Honda, would you make side-impact airbags standard equipment?multiple choice 1 There is not enough information to answer the question. No Yes If Toyota and Honda were able to cooperate, would you expect this same outcome?multiple choice 2 Yes No There is not enough information to answer the question.arrow_forward11 21. Imagine an N firm oligopoly for "nominally differentiated" goods. That is, each of the N firms produces a product that "looks" different from the products of its competitors, but that "really" isn't any different. However, each firm is able to fool some of the buying public. Specifically, each of the N firms (which are identical and have zero marginal cost of production) has a captive market -consumers who will buy only from that firm. The demand generated by each of these captive markets is given by the demand function Pn A- Xn , where Xn is the amount supplied to this captive market and Pn is the price of the production of firm n. There is also a group of intelligent consumers who realize that the products are really undifferentiated. These…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education