Construct the sequential game tree when Cable-net takes the first mover position by deciding whether to invest in infrastructure capacity expansion. Find the Nash equilibrium path by using the roll-back technique. How much profit does each firm earn? (Hint: the game tree will have three sequential decisions: Cable-net makes the decision first whether to invest in infrastructure capacity expansion, Peoplenet makes the entry decision, and Cable-net decides whether to lower the price.)
Q: Consider the following extensive form of the game. The outcome in the subgame perfect Nash…
A:
Q: The following table shows two firms in a single-stage game. Each firm makes its decision without…
A: The strategy where the player would tend to continue with the strategy chosen by them while knowing…
Q: Consider trade relations between the United States and Mexico. Assume that the leaders of the two…
A: Dominant strategy: The dominant strategy refers to the strategy that yields maximum benefit…
Q: Table B Pricing Matrix shows the pricing options for two mechanics, Angela and Tom, operating in an…
A: A pricing strategy methodology is a model or technique used to layout the best price for an item or…
Q: Consider two firms that are choosing the price of competing products. The choices are contained in…
A: In game theory, a Nash equilibrium is an optimal outcome and the players have no incentive to…
Q: Is this game dominance solvable? Why? Why not? If it is, please find the Nash equilibrium obtained…
A:
Q: Consider the normal-form game bellow where x > 0. a) For what values of x do both firms have a…
A: The dominant strategy can be referred as a strategy for the player that is the best response to all…
Q: Below are the payoff matrices for 3 two-player simultaneous decision games. The top payout in each…
A: 1) Nash equilibrium in the first case is when player 1 ( player on left) cheats, player 2 is better…
Q: Consider a Cournot duopoly model, where two firms compete by providing identical goods. The demand…
A: Firm 2 has 2 marginal cost where mC=2 is low marginal cost and mC=4 is the high marginal cost. This…
Q: SMITH, LTD Cheat Comply 150 125 Cheat 100 225 200 Z Comply 10 50 The above matrix displays the…
A: A Nash Equilibrium is such an outcome from which no player has any incentive to deviate.
Q: In the following game, identify how many subgames there are. Then, solve the game to find its…
A: In a tree game, when we have to find subgame perfect nash equilibrium, we use backward induction…
Q: An industry contains two firms that have identical cost functions C(q)=10+2q. The inverse demand…
A: When two firms' production decision depends on quantity sold by each other, they are in Cournot…
Q: Suppose that two companies – AlphaTech and BetaLabs – are competing for market share and must…
A: The Nash equilibrium is the situation that arises when both firms play an optimal strategy and do…
Q: Consider the following normal-form (matrix-form) game: Player 2 L M R 5,2 3,5 8,4 6,2 2,3 9,8 1,4…
A: We have 3×3 game, were both players have 3 actions
Q: (Bertrand’s duopoly game with discrete prices) Consider the variant of the example of Bertrand’s…
A: Nash equilibrium is an equilibrium situation from a which a firm is not willing to deviate from its…
Q: Imagine two vendors (our players) who must simultaneously choose a location to position their…
A: Location game is the concept of the game theory where n number of players choose the location for…
Q: The following information regarding the outcome of choices between two firms is provided as follows:…
A: Under dominance strategy or dominance one strategy adopted is better than the other strategy for one…
Q: Analyze the pure Nash equilibrium and mixed Nash equilibrium strategies in the following…
A: A Nash equilibrium is that equilibrium that results in stability in strategies. It is because once…
Q: Examine the following game tree. Fred and Sally are planning on running competing restaurants. Each…
A: a. The Nash equilibrium is obtained at the point where the two players will not change from their…
Q: show that if there is a unique profile of strategies that survive iterated removal of dominant…
A: 1.Game 1 :Compare strategy L and M. See the payoff of Bob. Try to see it vertically. If Bob plays L…
Q: Consider the following normal form representation of the standard competition between firm A and…
A: Nash equilibrium is such an equilibrium from where no player has any incentive to change its…
Q: Define a dominant strategy and Nash equilibrium. Can two firms interacting with each other have no…
A: In a game, optimal results can only be obtained if there is no incentive to deviate from the initial…
Q: Finally... for each of the following state the dominant strategies for each game and state the Nash…
A: Answer: Dominant strategy: dominant strategy refers to the strategy that always gives maximum payoff…
Q: Russia and Saudi Arabia both produce oil. If they increase production, they can sell more units at a…
A: The Nash equilibrium is a concept in game theory that states that if a player knows their opponent's…
Q: Assume that Acme and Gamma are the two main rivals in the market for hair dryers. Each firm is…
A: 1) The data given of profits is shown in tabular form below Gamma Acme Price= $50 Price =$60…
Q: Apple and Samsung control the majority of the Smart Phones. Suppose the diagram above represents…
A:
Q: Suppose Toyota and Honda must decide whether to make a new breed of side-impact airbags standard…
A: In the study of game theory, extensive form games is defined as the way of describing any game with…
Q: Consider the Nash Bargaining game. There are 2 players who have to decide how to split one dollar.…
A: A Bargaining Game is defined as a game where two or more players bargain on how to equally divide…
Q: 1. Consider the following Cournot model. The inverse demand function is given by p = 30 –Q, where Q…
A: In Cournot duopoly, two firms compete in quantity and simultaneously choose the optimal quantity…
Q: Which of the following is FALSE for the grim trigger strategy and the infinite horizon repeated…
A: We have 2×2 game, where both player has to choose between C and D.
Q: Consider the Nash Bargaining game. There are 2 players who have to decide how to split one dollar.…
A: The Nash equilibrium is the point at which both participants' dominant strategies are in balance and…
Q: Consider two firms that are choosing the price of competing products. The choices are contained in…
A: Dominated strategy : it is the strategy that gives minimum payoff to a player compared to his other…
Q: Consider this market that is dominated by two airlines, American and United. Each can choose to…
A: A dominant strategy is such strategy that the player opts each time, no matter the strategy chosen…
Q: Little Kona is a small coffee company that is considering entering a market dominated by Big Brew.…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Consider this market that is dominated by two airlines, American and United. Each can choose to…
A: Nash equilibrium refers to the situation where there is no incentive for both the player deviates…
Q: Suppose there are only two firms that sell smartphones, Flashfone and Pictech. The following payoff…
A: Simultaneous game is also known as a static game. This is a game where the players makes a decision…
Q: HBO and Showtime are both evaluating a new TV show. They could produce either a romantic comedy or a…
A: Game theory is concerned with the choice of an optimal strategy in conflict situations. The Nash…
Q: Imagine a small town with three car repair shops competing for a limited number of customers.…
A: The ideal conclusion of a game occurs where there is no incentive to depart from the beginning…
Q: Amazon faces the other group (Other), which consists of e-book manufacturers other than Amazon, in a…
A: Nash equilibrium refers to the situation when the parties involved in the game being played play or…
Q: The payoff matrix of economic profits, below, displays the possible outcomes for Coles (C) and…
A: In a specific game, the dominant strategy of the players refers to their preferred decision that…
Q: a.Big Brew maintains a low price and Little Kona enters. b.Brew maintains a low price and Little…
A: The correct answer is given in the second step.
Q: ) What would be the Cournot-Nash equilibrium quantity if Kenya airways has a constant marginal and…
A: Oligopoly market structure is the market structure in which there are few large firms in the market.…
Q: QUESTION 21 (Table: GoGo Gas and Fanny's Fantastic Fuel) Use Table: GoGo Gas and Fanny's Fantastic…
A: We have 2×2 game for two firms and they are deciding the action simultaneous.
Q: Suppose that there are two firms producing a homogenous product and competing in Cournot fashion and…
A: Each firm in Cournot oligopoly maximizes profit by producing at a point where their respective…
Q: Suppose a town only has two petrol stations, United and BP. Each could choose to charge a high price…
A: An oligopoly is a market structure where a small number of firms dominate the market. The existance…
Construct the sequential game tree when Cable-net takes the first mover position by deciding whether to invest in infrastructure capacity expansion. Find the Nash equilibrium path by using the roll-back technique. How much profit does each firm earn? (Hint: the game tree will have three sequential decisions: Cable-net makes the decision first whether to invest in infrastructure capacity expansion, Peoplenet makes the entry decision, and Cable-net decides whether to lower the price.)
Step by step
Solved in 2 steps with 1 images
- Using a payoff matrix/table to determine the equilibrium outcome Suppose there are only two firms that sell smartphones, Flashfone and Pictech. The following payoff matrix/table shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones. Pictech Pricing High Low Flashfone Pricing High 10, 10 4, 12 Low 12, 4 9, 9 For example, the lower left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $12 million and Pictech will earn a profit of $4 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a price, and if Flashfone prices low, Pictech will make more profit if it chooses a price. If Pictech prices high, Flashfone will make more profit if it chooses a price, and if Pictech prices low, Flashfone will make…Little Kona is a small coffee company that is considering entering a market dominated by Big Brew. Each company’s profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price:a. Does either player in this game have a dominant strategy?b. Does your answer to part (a) help you figure out what the other player should do?c. What is the Nash equilibrium? Is there only one?d. Big Brew threatens Little Kona by saying, “If you enter, we’re going to set a low price, so you had better stay out.” Do you think Little Kona should believe the threat? Why or why not?c. If the two firms could collude and agree on how to split the total profits, what outcome would they pick?Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smart phones, Flashfone and Pictech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones. Pictech Pricing High Low Flashfone Pricing High 11, 11 2, 18 Low 18, 2 10, 10 For example, the lower, left cell shows that if Flashfone prices low and Pictech prices high, Flashfone will earn a profit of $18 million and Pictech will earn a profit of $2 million. Assume this is a simultaneous game and that Flashfone and Pictech are both profit-maximizing firms. If Flashfone prices high, Pictech will make more profit if it chooses a ______ price, and if Flashfone prices low, Pictech will make more profit if it chooses a _____ price. If Pictech prices high, Flashfone will make more profit if it chooses a _____ price, and if Pictech prices low, Flashfone will make more…
- Imagine a small town with three car repair shops competing for a limited number of customers. Explain why the three shops working together to keep their prices high is unlikely to be a Nash equilibrium.Little Kona is a small coffee company that is considering entering a market dominated by Big Brew. Each company's profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price: True or False: Only Little Kona has a dominant strategy in this game. True or False Which of the following outcomes represent a Nash equilibrium in this case? Check all that apply. Big Brew maintains a high price and Little Kona enters. a.Big Brew maintains a low price and Little Kona enters. b.Big Brew maintains a high price and Little Kona does not enter. c.Big Brew maintains a low price and Little Kona does not enter. Big Brew threatens Little Kona by saying, “If you enter, we're going to set a low price, so you had better stay out.” True or False: Little Kona should not believe the threat. True or False If the two firms could collude and agree on how to split the total profits, what outcome would they…Consider the following static game with two firms as the players. Each firm must decide either to upgrade (U) an existing good to a new version; or not upgrade it (N). The decisions are simultaneous. If a firm chooses to upgrade, they have to pay a fixed cost of 7. If they don’t upgrade, there is no fixed cost. The marginal cost is always equal to 3. The demand side of the market is as follows: If neither firm upgrades, each firm sells 2 units at price 4. If both firms upgrade, each firm sells 3 units at price 5. If only one firm upgrades, the one who upgrades sells 5 units at price 5, and the other firm does not sell anything.
- The attached diagram depicts two firms controlled by Jacob and Elsa, and two potential actions each firm might take. Payoffs from action combinations appear in the normal-form depiction of the game played by Jacob and Elsa. What is the Nash equilibrium of the game (Jacob's strategy listed first)? a b Jacob's Actions d Dont' Advertise Advertise, Advertise Advertise Don't Advertise J=300 J=400 Don't advertise, Don't advertise Elsa's Actions Don't advertise (Jacob), Advertise (Elsa) с Advertise (Jacob), Don't Advertise (Elsa) E=200 Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. E=50 Advertise J=100 J=200 E=300 E=100where is the nash equilibrium? find out the dominant strategy. it was discovered that two domestic manufacturing companies were fixing prices. if each company is silent, there is no penalty, but production and business are disrupted due to continuous investigation by the Fair Trade Commission. The penalty for revealing the estimated loss due to the investigation and collusion is as follows: Firm 2 Silence Disclosure Silence -200, -200 -590, 0 Firm 1 Disclosure 0, -590 -450, -450 fine( a hundred million won)Define a dominant strategy and Nash equilibrium. Can two firms interacting with each other have no Nash equilibria if both have a dominant strategy?
- Refer to the accompanying payoff matrix. Which of the following is a Nash equilibrium? Company A Strategy 1 Strategy 2 Strategy 1 Company A's Profit: $8 million Company B's Profit: $9 million Company B Company A's Profit: $10 million Company B's Profit: $8 million None of the above, Strategy 2 Company B's Profit: $8 million Company A's Profit: $7 million Company B's Profit: $7 million Company A's Profit: $8 million Company A chooses Strategy 1 and Company B chooses Strategy 1. Company A chooses Strategy 2 and Company B chooses Strategy 2. Company A chooses Strategy 1 and Company B chooses Strategy 2. Company A chooses Strategy 2 and Company B chooses Strategy 1.Google and Microsoft are the two dominant firms in the internet search market. They each must decide on whether to have a large budget for research and development (R&D). Their respective payoffs are in the following matrix: Google Microsoft Large R& D Small R& D Large R& D +$30m 0 What is the Nash equilibrium? +$20m +$30m Small R& D +$70m +$50m 0 +$40m Both google and Microsoft have small R&D budgets. There is not a Nash equilibrium because both firms don't have a dominant strategy. Both google and Microsoft have large R&D budgets. Google has a large, and Microsoft a small, R&D budgets.Read-a-lot Bookstore and Frontier Books are competitors in the Carlton retail book market. Each has a choice of setting a low price or high price. The payoffs from the price choices are: Assume that the game is played sequentially with Frontier making a decision about its choice of price strategy, and then Read-a-lot, after observing Frontier’s strategy, chooses its price strategy. What is the best choice for Frontier? [To answer this question, you need to take into account your answer for question 1 regarding the best strategy for Read-a-Lot.] a. Low price b. High price c. Frontier is indifferent between High price and Low price d. It is not possible to identify a best choice for Frontier.