Firm 1 and Firm 2 are Stackelberg competitors. Firm 1 is the leader and Firm 2 is the follower. They have the same cost functions Cost, = 30Q1 Cost2 = 30Q2 The market demand is 2P QD = 780- 3 In the SPE of this game, Firm 1 produces Q1= . Firm 2 produces Q2=| +, and the price is P=

Two rival companies competing in the same market need to decide their plans for future expansion of their stores. The Table below shows the possible outcomes of their mutually interdependent actions (payoffs are profits in £m)     Giga Company Titanic Conglomerate   No Change Refurbishment of existing stores Large Expansion No Change     30, 40      25, 35    15, 24 Refurbishment of existing stores     35, 30      28, 32    18, 33 Large Expansion     12, 22     18, 20    20, 25   The Nash equilibrium:            (A)       does not exist. (B)       occurs when both firms choose Refurbishment of existing stores.              (C)       occurs when both firms choose Large Expansion. (D)       occurs when both firms choose No Change.

Q2

Table 3. This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 5 units or 6 units. The profit for each firm is given in the table as (Profit for Firm A. Profit for Firm B). Firm A Q=5 Q=6 Firm B Q=5 (24, 24) (30, 10) Q=6 (10,30) (19, 19) Refer to Table 3. The dominant strategy For Firm A is to produce Select one: O a. 5 units and the dominant strategy for Firm B is to produce 5 units. b. 5 units and the dominant strategy for Firm B is to produce 6 units. c. 6 units and the dominant strategy for Firm B is to produce 5 units. d. 6 units and the dominant strategy for Firm B is to produce 6 units.

Two firms are competing on a market with demand P-47-3Q by sequentially choosing how much to produce Both firms have a marginal cost of 5 In the subgame perfect Nash equilibrium: Firm 1 will produce [Select] Firm 2 will produce [Select] The equilibrium price is [Select]

Suppose that Firm 1 and Firm 2 are Stackelberg competitors in the market for popsicles. Firm 1 is the leader and Firm 2 is the follower. They have the same cost functions such that MC = 4. Market demand for popsicles is given by QD = 38 – 0.5P. Use this information to answer questions #1 and #2. 1. How many popsicles will Firm 1 produce in the SPE of this game? a. 91 6 b. q1 = 9 12 91 d. 91 с. 18 e. q1 = 36 %3D 2. If these firms were Cournot competitors, then compared to the outcome in #1 (Hint: No calculations necessary.) a. Firm 1 would earn more profit, and Firm 2 would earn less profit. b. Firm 1 would earn less profit, and firm 2 would earn more profit. c. Both firms would earn less profit. d. Both firms would earn more profit. The firms' profits would be the same, but industry-wide profit would be lower.