Suppose the table below represents the payoffmatrix for two noncooperative firms in duopoly.Which of the following describes the outcomein this market?Firm A AdvertiseFirm ANoAdvertisingLow profitLossFirm BAdvertiseLow profitHigh profitFirm BNo AdvertisingHigh profitLossModerate profitModerate profitThe firms will reach an outcome that is preferableto the outcome they would achieve throughcooperation.O If both firms follow their dominant strategy eachwill reach the highest possible profit.New firms will enter this market to takeadvantage of the opportunity for above-normalprofit.O At the Nash equilibrium both firms will earn lowprofit.

In game theory, a Nash equilibrium is a situation in which no player has an incentive to change…

Suppose the table below represents the payoff matrix for two noncooperative firms in duopoly. Which of the following describes the outcome in this market? Firm A Advertise Firm A No Advertising Low profit Loss Firm B Advertise Low profit Firm B No Advertising High profit Loss Moderate profit

Suppose the table below represents the payoff matrix for two noncooperative firms in duopoly. Which of the following describes the outcome in this market? Firm A Advertise Firm A No Advertising Low profit Loss Firm B Advertise Low profit Firm B No Advertising High profit Loss Moderate profit

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 5PA

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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?
Think about firms such as the Coca Cola Company and PepsiCo who competeagainst each other in the monopolistically competitive market for soft drinks. Eachfirm produces a unique product, but each of these unique products is to some extenta substitute for the soft drinks produced by rival companies.Now imagine a situation where the firms within such a market are facing suchextreme competition that they are unable to make an operating profit. Characterisethis situation diagrammatically and explain what will happen to the market, payingparticular attention to the exit or entry of firms out of (or into) the market.
Refer to the table below to answer the following questions. Table 14.2.10 Fim A Comply A: Sim Cheat A $1 Sm Comply B Sim B-S05m Firm B A:-50.5m A0 Cheat B $15m B:0 Refer to Table 14.2.10. Firm A and Firm B are the only producers of soap powder. They collude and agree to share the market equally. The equilibrium a dominant strategy equilibrium because the strategy in this game is for a firm Select one O A is to comply regardless of the other firm's choice O B.is to comply when the other firm cheats and to cheat when the other firm complies O Cis not to comply when the other firm complies and to cheat when the other firm cheats OD. is to cheat regardless of the other firm's choice OEis not to comply when the other firm cheats and to cheat when the other firm complies 219 PM
The payoff matrix below is for two firms, A and B, deciding the quantity of their output levels. What is the dominant strategy of each firm? icrosc Firm B Strategy High output Low output High output 100, 80 0, 125 Firm A Low output 65, 0 40, 65 Both firms produce low levels of output. DO cGill Both firms produce high levels of output. Temp Firm A's dominant strategy is to produce low levels of output, but Firm B does not have a dominant strategy. Order Article O Firm B's dominant strategy is to produce low levels of output, but Firm A does not have a dominant strategy. Neither firm has a dominant strategy. oy 00 halysis
For example, the lower left cell of the matrix shows that if Full Coop advertises and Lucky Bird does not advertise, Full Coop will make a profit of $14 million, and Lucky Bird will make a profit of $3 million. Assume this is a simultaneous game and that Lucky Bird and Full Coop are both profit- maximizing firms. If Lucky Bird chooses to advertise, it will earn a profit of $ advertise. million if Full Coop advertises and a profit of $ million if Full Coop does not If Lucky Bird chooses not to advertise, it will earn a profit of $ not advertise. million if Full Coop advertises and a profit of $ million if Full Coop does S If Full Coop advertises, Lucky Bird makes a higher profit if it chooses If Full Coop doesn't advertise, Lucky Bird makes a higher profit if it chooses Suppose that both firms start off by deciding not to advertise. If the firms act independently, what strategies will they end up choosing? Both firms will choose not to advertise. O Lucky Bird will choose not to…
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. When Chinese automakers began exporting cars, rather thanfocusing on developed nations in the West, they shippedautos to emerging markets in countries such as Algeria, Russia,Chile, and South Africa. In these markets, even used vehiclesfrom multinational manufacturers are relatively scarce—andrelatively expensive. The Chinese automakers, who prioritizelow cost rather than design or even safety, applied a penetration-pricing strategy. A woman in Santiago, Chile, who boughta new Chery S21 explained, “The price factor is fairly decisive.I paid $5,500 new and full. Toyota with similar features costsaround $12,000.” Why do you think Chinese automakerschose that pricing strategy? Do you think it was successful?As Chinese regulators pressure these manufacturers to maketheir cars safer, do you think they will be able to keep theirprices low compared with those of the international automakers? Why or why not?26
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