7. Acura and Volvo offer warranties on their automobiles, where wA and we are the numbers of years of an Acura and Volvo warranty, respectively. The revenue for Firm i, i = A for Acura and V for Volvo, is 27000 w₁/(WA+Wv). Its cost of providing the warranty is C₁ = 2000 w₁. Acura and Volvo participate in a warranty-setting game in which they simultaneously set warranties. Calculate the Nash equilibrium warranties.

7. Acura and Volvo offer warranties on their automobiles, where wA and we are the numbers of years of an Acura and Volvo warranty, respectively. The revenue for Firm i, i = A for Acura and V for Volvo, is 27000 w₁/(WA+Wv). Its cost of providing the warranty is C₁ = 2000 w₁. Acura and Volvo participate in a warranty-setting game in which they simultaneously set warranties. Calculate the Nash equilibrium warranties.

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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Does each individual in a prisoners dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.
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