14. In this situation, Dairy Queen has a. an incentive to threaten high prices, which would be credible. b. an incentive to threaten low prices, which would be credible. c. an incentive to threaten high prices, which would be an empty threat. d. an incentive to threaten low prices, which would be an empty threat. no incentive to make a threat. е.
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- 1. Consider an industry with inverse demand given by p = 8 – q, where p is the price, and q is the quantity. There is one incumbent firm and one potential entrant. In the first stage of the game, the incumbent chooses its quantity qi. In the second stage, the potential entrant observes qi and chooses its quantity Ce. The potential entrant can also decide not to enter the market. The production technology of both firms are represented by the cost function C = 2q. To enter industry implies a fixed entry cost of F. (a) Find the equilibrium of the game, assuming that the potential entrant enters the industry. What are the profits of firms? (b) Assume that entry is not blockaded. For which values of F does the incumbent firm prefer to deter entry? (c) For which values of F, entry blockaded?E. Game theory Two firms in Ithaca both making sandwiches have two strategies available: charge a low price and charge a high price. In each cell (box) the first entry is the profit to Angie’s Sandwiches (AS) and the second entry is the profit per week for James Jems. (JJ) JJ charges low price JJ charges high price AS charges low price $20,000, $20,000 $45,000, $50,000 AS charges high price $50,000, $35,000 $30,000, $30,000 1. Is there a Nash Equilibrium? Where is it? Explain. 2. In which cell will the total profit be a maximum?You are considering entering a market serviced by a monopolist. You currently earn £0 economic profits, while the monopolist earns £5. If you enter the market and the monopolist engages in a price war, you will lose £5 and the monopolist will earn £1. If the monopolist doesn't engage in a price war, you will each earn profits of £2. (a) Write out the extensive form of the above game? (b) Are there any Nash equilibria for the game? Explain. (c) Is there a subgame perfect equilibrium? Explain. (d) If you were the potential entrant, would you enter? Explain why or why not.
- 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.4. A model of network externalities. Suppose that there are 50 potential consumers in the market for a new technology that exhibits network effects. There is a uniform distribution of consumers with individual valuations, v, ranging from S1, $2,.., S50. Consumer valuation from consuming the technology is given by vN, where N is the number of consumers adopting the technology. Consumers with purchase the product as long as their valuation is greater or equal to the price, so that the marginal consumer has a valuation such that p3vN. The number of consumers adopting the technology is given by the number of people with valuation greater than y, i.e. N = 50 - v. %3D a) Using the information above, derive the relationship between the price of the product and the number of consumers adopting the product, N. Characterize this relationship – does it reflect a typical market demand curve? b) If the price for the product is $600, find the three equilibrium number of adopters in the market. c)…(f) Does GaterTools have a dominant strategy? Explain using numbers from the payoff matrix.(g) Identify the Nash equilibrium. Explain why this is a Nash equilibrium using information from the payoff matrix.(h) Suppose HandyBilt makes a credible commitment to GaterTools that if GaterTools maintains its price, then HandyBiltwill pay GaterTools $250. Will this offer result in a Nash equilibrium with different strategies from those identified in part(g) ? Explain using numbers from the payoff matrix.
- This is a Microeconomics problem. Two firms A and B operating in the same market must choose between a collude price and a cheat price. Answer the following questions in order. (a) Does Firm A have a dominant strategy? Explain your answer. (b) Does Firm B have a dominant strategy? Explain your answer. (c) Is there an equilibrium solution to the above game? (d) Is this equilibrium solution to the game the most "ideal" outcome for the players? Explain clearly why or why not.a) How many players does this game have? What are the strategies of each player? (b) What are the Nash equilibria of this game? (c) What are the Pareto Efficient outcomes?Potential Entrant Enter Stay Out Incumbent (100, 800) High Prices Low Prices (300, 500) (-100, 400) 11. Consider the entry-deterrence game above. In this game the Incumbent Firm has a. an incentive to threaten high prices, which would be credible. b. an incentive to threaten low prices, which would be credible. an incentive to threaten high prices, which would be an empty threat. d. an incentive to threaten low prices, which would be an empty threat. no incentive to make a threat. с. е.
- (a) Compute the Nash Equilibrium in pure strategies of the game above. (b) Compute the subgame perfect Nash equilibrium.(c) Compute the perfect Bayesian euilibrium. (I need help with how to solve these questions in detail)10. Electronic Arts (EA) has decided to introduce a revolutionary video game. As the first firm in the market, it will have a monopoly position for at least some time. In deciding what type of manufacturing plant to build, it has the choice of two technologies. Technology A is publicly available and will result in annual costs of CA(q) 10 + 8q. Technology B is a proprietary technology developed in EA's research labs. It involves a higher fixed cost of production but lower marginal costs C'B (q) = 60 + 2q. EA must decide which technology to adopt. Market demand for the new product is p = 20 – Q, where Q is the total industry output. a) Suppose EA were certain that it would maintain its monopoly position in the market for the entire product lifespan (about five years) without threat of entry. Which technology would you advise EA to adopt? What would be EA's profit given this choice? b) Suppose EA expects its rival, Ubisoft, to consider entering the market shortly after EA introduces its…Profits for two competing firms depend on the decisions to advertise or not to advertise as follows: If neither firm advertises, each makes a weekly profit of $100. If one firm advertises while the other does not, the firm that advertises makes $120 while the firm that doesn’t advertise makes $60. If both firms advertise, each firm makes $80. (a) What is the Nash equilibrium? Is this outcome efficient, from the perspective of the two firms? (b) How does the outcome of the game change if the parties can make a binding agreement in advance about advertising practices? (c) How does the game change if it is repeated over the course of many weeks (but the firms cannot make a binding agreement about how much advertising they will do)?