Consider the following payoff matrix for two oligopolists that are deciding what quantity to produce: Firm 2 High Quantity Low Quantity $70k; $70k $130k; $20k High Quantity Firm 1 $20k; $130k $100k; $100k Low Quantity In the Nash equilibrium of this game, what are the payoffs to each firm? O a. Firm 1 receives $130k and Firm 2 receives $20k O b. Firm 1 receives $20k and Firm 2 receives $130k. O c. Firm 1 receives $100k and Firm 2 receives $100k. O d. Firm 1 receives $70k and Firm 2 receives $70k.
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- Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices The payoff matrix shows the profits of the companies in millions based on their possible actions. Company B Increase Price Maintain Price Company A Increase Price $50, $40 $35, 530 Maintain Price 555, $45 $60, $35 The government offers a $5 milon subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy? The Nash equilibrium changes, and both companies will maintain their prices O The Nash equilbrium changes, and both companies will increase their prices O The Nash equilibrium remains the same, and both companies will increase their prices O Company A wit increase its price, whie Company B maintains its price. O Company A will maintain its price, while Company Bincreases ts price.. OPEC, the Organization of Petroleum Exporting Countries, was founded in 1969. Their original objective was to form a cartel to increase the price that they receive for their oil exports. Create a prisoner’s dilemma type game for two large members of OPEC (e.g. Saudi Arabia and Indonesia). Create numbers, where payoffs are total annual oil export revenues for each of these two countries. Verbally explain how you got your numbers. Find the Nash equilibrium. Based on this model, what strategy is in the oil exporters’ best interest (Nash or otherwise)? How do they make it happen? Create another prisoner’s dilemmamodel for all of OPEC on one side, and all non OPEC oil exporting nations on the other side. Create numbers, where payoffs are total annual oil export revenues for each of the two sides. Verbally explain how you created your numbers. Also create your numbers applying the fact that OPEC’s total production capacity is greater than total non OPEC exports…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.
- 14 Firm B High Price Low Price Firm A High Price A = $250 B-$250 A = $200 B=$325 Multiple Choice Low Price A $325 B-$200 A=$175 B=$175 Answer the question based on the payoff matrix for a duopoly in which the numbers indicate the profit in millions of dollars for each firm. Assume that firm B adopts a high-price strategy, firm A maintains a low-price strategy. Compared to the results from a high-price strategy for both firms, firm B will now lose $50 million in profit and firm A will lose $75 million in profit.tory Bookmarks Profiles Quiz: Module 5 Qu x com/courses/111015/quizzes/852942/take To 9 7 C Tab Window Help Course Modules: Ex Topic: Planet Mon x | For the remaining questions consider two gas stations competing as an oligopoly. There are the only two gas stations in a small town. Each week they must simultaneously display their prices choosing between a high price and a low price. The payoff matrix below displays the weekly profits earned by the gas stations if they choose the various prices. Shell Decisions tv High Price Low Price Low Price NIDZA O V High Price S: $5,000 C: $5,500 (a) If Shell knows Chevron will choose the HIGH PRICE, what price should Shell choose? Low Price S: $7,500 C: $1,500 (b) If Shell knows Chevron will choose the LOW PRICE, what price should Shell choose? Low Price Aa Chevron Decisions (c) Does Shell have a dominant strategy? If so, what is it? Their dominant strategy is to Q Search Securify Module 5 Practice. x | Module 5 Lecture X (d) If Chevron knows…Firm A Strategy Advertise Don't Advertise Firm B Advertise 0,0 -1,40 Don't Advertise 40, -1 10, 10 Two cigarette manufacturers play the following simultaneous-move billboard advertising game. Profit payoffs for both companies are shown in the normal form game below. There is a 20 percent chance that the government will ban cigarette sales in any given year. If they collude and Firm A cheats, how much will Firm A earn in period 1? (Enter a numerical value as your answer with no decimal points. For example, if your answer is "one hundred" you need to type in "100"). What is the probability that the game will end? (Enter a numerical value as your answer with no decimal points. For example, if your answer is "one hundred percent" you need to type in "100"). If they collude and Firm A cheats, what will be the profit for Firm A for all periods? (Enter a numerical value as your answer with no decimal points. For example, if your answer is "one hundred" you need to type in "100"). If they…
- Table 2 below represents the payoff matrix for two firms, X and Y, who compete with each other. Payoffs are in millions of pounds (£) profit. Each firm may choose one of two strategies i.e. set a high price for its output or set a low price for its output. Neither firm knows what strategy the other will adopt. Table 2 11. Firm Y High Price Low Price Firm X High Price X-£7mn, Y-£7mn X=£1mn, Y=£15mn Low Price X-£15mn, Y-£1mn X=£4mn, Y=£4mn In the absence of collusion, which combination of strategies is most likely to occur? a) X sets a low price and Y sets a low price. b) X sets a high price and Y sets a low price. c) X sets a low price and Y sets a high price. d) X sets a high price and Y sets a high price.8. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Creamland Dairy King Advertises Doesn't Advertise 9,9 Doesn't Advertise 3, 15 Advertises 15, 3 11, 11 For example, the upper-right cell shows that, if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $15 million, and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of $ not advertise. If Creamland decides not to advertise, it will earn a profit of $ does not advertise. million if Dairy King advertises and a profit of $ If Dairy King advertises, Creamland makes a higher profit if it chooses million if Dairy King advertises and a profit of $…Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices. The payoff matrix shows the profits of the companies in millions based on their possible actions.. Company A Increase Price Company B Increase Price Maintain Price $50, $40 Maintain Price $55, $45 $35, $30 $60, $35 The government offers a $5 million subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy? The Nash equilibrium changes, and both companies will maintain their prices The Nash equilibrium changes, and both companies will increase their prices. The Nash equilibrium remains the same, and both companies will increase their prices Company A will increase its price, while Company B maintains its price. Company A will maintain its price, while Company B increases its price
- 12. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Bean Bruuer Advertise Doesn't Advertise Advertise Hatte Latte Doesn't Advertise 9,9 3,15 15,3 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $15 million, and Hatte Latte will make a profit of $3 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing firms. If Hatte Latte chooses to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer If Hatte Latte chooses not to advertise, it will earn a profit of $ does not advertise. million if Bean Bruuer…Suppose that an oligopolistic is charging $21 per unit of output and selling 31 units each day. What is its daily total revenue? Also suppose that previously it had lowered its price from $21 to $19, rivals matched the price cut, and the firmâs sales increased from 31 to 32 units. It also previously raised its price from $21 to $23, rivals ignored the price hike, and the firmâs daily total revenue came in at $482. Which of the following is most logical to conclude? The firmâs demand curve is (a) inelastic over the $21 to $23 price range, (b) elastic over the $19 to $21 price range, (c) a linear(straight) down sloping line, or (d) a curve with a kink in it?Smith Cable, Inc. and Jones Glass Fibre Works are the two largest suppliers of a specialty fiber-optic cable used by NASA and military defense contractors. On the first day of every month, both companies post on the Internet a list of prices for their various fiber-optic cable products-either high prices or low prices. The following payoff table provides the monthly profits for Smith and Jones: Jones Glass Fibre Works High prices Low prices A C Smith Cable, Inc. High prices $7, S4 B D Low prices $2, $5.5 $8, S1 $4, $2 Payoffs in dollars of monthly profit (a) Suppose the pricing decision is made sequentially. Using the payoff table, complete the two sequential game trees. In the first game tree, let Smith Cable, Inc. make the first pricing decision. In the second game tree, let Jones Glass Fibre Works go first. After you complete the two game trees, solve both sequential decision games using the roll-back method. Circle the solution path on each game tree. (b) Do Smith Cable, Inc. and…