B2D/E FG/H(4,5) (0,2) (6,8) (6,5) (3,8) (4,5) (7,10) (5,6) (-1,0)Consider the game above and answer the following questions.a) Transform the game from extensive form to normal form.(5)

Let's work through the problem step by step. The question asks you to transform the game from its…

Answered: B 2 D/E F G/H (4,5) (0,2) (6,8) (6,5)…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a) What is the pure strategy Nash equilibrium outcome if there is one? (solved)b) Is this a socially optimal outcome? If not, which outcome is preferred? (solved)c) Do all three solution approaches for simultaneous games work independently (not together)? If not, which do not? (solved) d) Draw the game as a game tree (extensive form). (to be solved)e) Switch the payoffs in cells (A, A) and (D, D). What is the pure strategy Nash equilibrium outcome if there is one? (to be solved)
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Imagine that two firms in two different countries want to bring a new product to market. Due to economies of scale, if both firms do this, they will both lose £50 million. But if only one firm does this, it will gain £300 million. (a) What is the best strategy for firm A, if firm B has not yet entered the market, and why? (b) Illustrate this with a game theory diagram, showing appropriate payouts. (c) What is the welfare-maximising strategy for a government, and why?
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19. The Nash equilibrium in the Cournot model is 'stable' because (a) No firm wishes to enter or exit the market. (b) If output levels move away from the NE then they will always converge back. (c) No firm wishes to change their strategy given the strategy of the opponent. (d) The output levels lie on the intersection of the two best response functions. (e) More than one of the above.
(d) An industry consists of eleven identical firms with each firm's cost given as c(q) = 4q +q? . Market demand for the product is Q 100 - p where = firm's quantity, Q = market quantity and p = price of product. All the eleven firms decide to form a cartel that will operate as a monopoly with total costs C(Q) = 4Q + Q² and divide the profits equally among its 11 member firms. (i) Find the quantity produced by each cartel firm. (ii) What will be the price set by the cartel firm? (iii) Calculate the amount of profit that each cartel firm makes. (iv) If a member firm cheated, calculate this cheating member firm's quantity produced assuming that the other firms' maintain their agreed cartel price and output.
(d) (e) (f) Detailed answers
2 B D/E F G/H G/H (4.5) (0.2) (6.8) (6.5) (3,8) (4.5) (7,10) (5.6) (-1,0) Consider the game above and answer the following questions. a) Transform the game from extensive form to normal form. (5)
(c) Consider the following two-player, zero-sum game: Y1 Y2 X1 -2 8 X2 10 -5 What is the outcome of this game?

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B 2 D/E F G/H (4,5) (0,2) (6,8) (6,5) (3,8) (4,5) (7,10) (5,6) (-1,0) Consider the game above and answer the following questions. a) Transform the game from extensive form to normal form. (5)