Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 15A, Problem 1.2CE
To determine
To describe: Whether W will wish to amend its earlier bid in round 3.
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Would any other solution other than Nash Equilbrium approach work? Why?
The Tampa Tribune and the St. Petersburg Times compete for readers in the Tampa Bay market for newspapers. Recently, both newspapers considered changing the prices they charge for their Sunday editions. Suppose they considered the following payoff table for making a simultaneous decision to charge either a low price of $0.50 or a high price of $1.00. Tampa’s profits are shown in regular type. St. Petersburg’s profits are shown in bold.
7. Which cell(s) is/are strategically stable?
Explain how the strategic choice of reservation price can raise expected profitability yet threaten efficiency in an English auction.
Chapter 15A Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- Assume that the effective security level is now determined by the highest (not the lowest) security measures chosen by airlines. Letting max{s1, . . . , sn} denote the highest of the airlines’ strategies, we find that airline i’s payoff is now 50 + 20 x max{s1, . . . , sn} -10 si.Assuming the same strategy sets, find all Nash equilibria.arrow_forwardTwo firms bid for a contract to build a university building. Their construction costs are independent and uniformly drawn from [0,1]: Both bidders submit their bids si- multaneously. The winner is the bidder who submits a lowest bid. Tie-breaking rule is random. This kind of bidding game is called i'reverse auction' because the bidders bid for the right to provide a service and the winner is paid for the service. The FCC in 2017 has adopted similar auctions designed to repurpose spectrum for new uses. (a) In the first auction, the winner gets paid the loser's bid. For example, if the winner's cost is 0.5, his bid is 0.56, and the loserís bid is 0.6, then the winner gets the contract and the university pays the winner 0.6. The winner's net profit from the contract is 0.6-0.5 = 0.1. Solve for a Bayesian Nash equilibrium of this auction. What is the equilibrium bid of a firm bid if his cost is actually 0.5? (b) In the second auction, the winner gets paid the his/her own winning…arrow_forwardTrue or False: Every finite extensive-form game of imperfect information admits at least one pure-strategy Nash equilibrium. Justify if true or give a counter-example if notarrow_forward
- Analyze the pure Nash equilibrium and mixed Nash equilibrium strategies in the following manufacturer–distributor coordination game. How would you recommend restructuring the game to secure higher expected profit for the manufacturer?arrow_forwardThe Able Manufacturing Company and Better Bettors, Inc. are rival firms in the production of a calculator used by horse racing fans for handicapping (determining betting strategies). Each firm has a fixed cost of $100 and a MC = $10 in producing calculators. The demand for the industry’s product is: Q = 900 – 5P, where P is the market price and Q = Q1 + Q2. If each firm must choose how many calculators to produce and sell without knowing of its rival’s production decision, what will be the Cournot equilibrium price and quantities produced? Calculate the profit for each firm.arrow_forwardConsider a game where there is a $2,520 prize if a player correctly guesses the outcome of a fair 7-sided die roll.Cindy will only play this game if there is a nonnegative expected value, even with the risk of losing the payment amount.What is the most Cindy would be willing to pay?arrow_forward
- Poker players are known to bluff once in a while, meaning that they will make a large bet despite holding inferior cards in an effort to pressure other players to fold their hands. Would bluffing be considered a dominant strategy in poker? a) No, because if a player bluffs on every hand, other players will catch on and call his or her bluff. b) No, because bluffing is usually not successful and is therefore considered a secondary strategy. c) Yes, because it usually results in a winning hand. d) Yes, because it is the main strategy used by players.arrow_forwardIs the following statement true? "5 bidders with private values uniformly distributed between 0 and 1 enter a 1st price auction. Assuming that everyone is playing the symmetric equilibrium bidding strategy, the optimal bid for a bidder who makes a draw of 0.75 is 0.7."arrow_forwardDiscuss the benefits and drawbacks of Dutch Auction IPO versus traditional IPO.arrow_forward
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