Consider the game matrix below. A company is thinking about establishing itself in a market. Another company is already in this market and can choose to start a price war or not. Company 1 can thus choose "Establish" or "Do not establish"; company 2 "Price war" or "Nothing price war". The numbers in the cells are profits (in thousands of SEK). In each cell, company l's profit is listed first: (100,60) thus means that company 1 receives one hundred thousand SEK in profit and that company 2 receives sixty thousand SEK in profit. Both firms are profit maximizing. 4. Företag 2 Priskrig Inget priskrig Etablera (100, 60) (120,25) Företag 1 Etablera ej (170, 50) (80,90) 4a Analyze whether company 1 has a dominant strategy. Motivate based on the gains i the game matrix. 4b Analyze whether company 2 has a dominant strategy. Motivate based on the gains i the game matrix. 4c Determine all Nash equilibria of the game. Justify based on the winnings in the game matrix

Consider the game matrix below. A company is thinking about establishing itself in a market. Another company is already in this market and can choose to start a price war or not. Company 1 can thus choose "Establish" or "Do not establish"; company 2 "Price war" or "Nothing price war". The numbers in the cells are profits (in thousands of SEK). In each cell, company l's profit is listed first: (100,60) thus means that company 1 receives one hundred thousand SEK in profit and that company 2 receives sixty thousand SEK in profit. Both firms are profit maximizing. 4. Företag 2 Priskrig Inget priskrig Etablera (100, 60) (120,25) Företag 1 Etablera ej (170, 50) (80,90) 4a Analyze whether company 1 has a dominant strategy. Motivate based on the gains i the game matrix. 4b Analyze whether company 2 has a dominant strategy. Motivate based on the gains i the game matrix. 4c Determine all Nash equilibria of the game. Justify based on the winnings in the game matrix

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5CQQ

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Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Film A) is large and the other film (Film B) is small, as the prisoners dilemma box in Table 10.4 shows. Assuming that both films know the payoffs, what is the likely outcome in this case?
Does each individual in a prisoners dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.
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1.10 1.20 - 226 - 215 - 106 - 89 - 56 - 37 - 44 - 25 - 52 - 32 - 70 -51 - 93 -76 - 118 - 102 What are the firms' strategies? The firms pick O A. quantities. OB. profits. O C. advertising. O D. competition. OE. prices. Why is this situation an example of the prisoners' dilemma game? This game is a type of prisoners' dilemma because O A. the firms are rivals. O B. competing maximizes joint firm profits. O C. the game results in cooperation. Click to select your answer. P&G 1.10 1.20 1.30 1.40 1.50 1.60 1.70 1.80 1.30 - 204 - 73 - 19 -6 - 15 - 34 - 59 -87 1.40 194 - 58 2 4 12 3 - 18 -44 -72 1.50 - 183 - 43 15 29 20 -1 - 28 -57 1.60 - 174 - 28 31 46 36 14 -13 -44 1.70 - 165 - 15 47 62 52 30 1 -30 1.80 - 155 -2 62 78 68 44 15 - 17
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P&G 1.10 1.20 1.10 - 226 - 215 1.20 - 106 - 89 1.30 - 56 - 37 1.40 - 44 - 25 1.50 - 52 -32 1.60 - 70 -51 - 93 -76 1.70 1,80 - 118 - 102 Why is this situation an example of the prisoners' dilemma game? This game is a type of prisoners' dilemma because O A. the firms are rivals. OB. competing maximizes joint firm profits. O C. the game results in cooperation. Click to select your answer. 1.30 - 204 -73 - 19 -6 - 15 - 34 - 59 -87 1.40 -194 - 58 2 S 12 5 3 - 18 -44 -72 1.50 - 183 - 43 15 29 20 -1 - 28 -57 1.60 - 174 - 28 31 46 36 14 -13 -44 1.70 - 165 - 15 47 62 52 30 1 -30 130 15228841517 1.80 - -2 62 68 44