6. Chevron and Arco are two petrol stations in direct competition with each other. Each firm can set a low price or a high price. If they each set a high price, they will split the market. If they each set a low price, they will split the market again, but at a lower profit. If one firm sets a low price and the other sets a high price, the low-price firm will capture all customers. ii) iii) Arco A B Chevron A 10,10 15,0 B 0,15 5,5 What is the Nash equilibrium if this game is played once? If this game is repeated indefinitely what will happen? If there is a prediction that the world will end in December 2023. Both the manager of Chevron and Arco firmly believe this. Does your result in b change?

6. Chevron and Arco are two petrol stations in direct competition with each other. Each firm can set a low price or a high price. If they each set a high price, they will split the market. If they each set a low price, they will split the market again, but at a lower profit. If one firm sets a low price and the other sets a high price, the low-price firm will capture all customers. ii) iii) Arco A B Chevron A 10,10 15,0 B 0,15 5,5 What is the Nash equilibrium if this game is played once? If this game is repeated indefinitely what will happen? If there is a prediction that the world will end in December 2023. Both the manager of Chevron and Arco firmly believe this. Does your result in b change?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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