Suppose that Panasonic and LG are the only two firms that can produce a new type ofholographic TV. The payoffs (in millions of dollars) from entering this product market are shown inthe payoff matrix to the right.If both firms move simultaneously, does either firm have a dominant strategy?A. Both firms have a dominant strategy, which is to enter.B. Neither firm has a dominant strategy.C. Both firms have a dominant strategy, which is not to enter.D. Panasonic has a dominant strategy, which is not to enter, but LG does not have adominant strategy.E. Panasonic has a dominant strategy, which is to enter, but LG does not have a dominantstrategy.CEnterLGDo Not EnterEnter- 1500Panasonic- 1501500Do Not Enter1,5000

A strategy that gives the highest payoff among all strategies irrespective of the action of another…

Suppose that Panasonic and LG are the only two firms that can produce a new type of holographic TV. The payoffs (in millions of dollars) from entering this product market are shown in payoff matrix to the right. the If both firms move simultaneously, does either firm have a dominant strategy? OA. Both firms have a dominant strategy, which is to enter. OB. Neither firm has a dominant strategy. O C. Both firms have a dominant strategy, which is not to enter. O D. Panasonic has a dominant strategy, which is not to enter, but LG does not have a dominant strategy. O E. Panasonic has a dominant strategy, which is to enter, but LG does not have a dominant strategy. Enter LG Do Not Enter Enter - 150 0 Panasonic - 150 1500 Do Not Enter 1,500 0 0

Suppose that Panasonic and LG are the only two firms that can produce a new type of holographic TV. The payoffs (in millions of dollars) from entering this product market are shown in payoff matrix to the right. the If both firms move simultaneously, does either firm have a dominant strategy? OA. Both firms have a dominant strategy, which is to enter. OB. Neither firm has a dominant strategy. O C. Both firms have a dominant strategy, which is not to enter. O D. Panasonic has a dominant strategy, which is not to enter, but LG does not have a dominant strategy. O E. Panasonic has a dominant strategy, which is to enter, but LG does not have a dominant strategy. Enter LG Do Not Enter Enter - 150 0 Panasonic - 150 1500 Do Not Enter 1,500 0 0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a market with two drink manufacturers, Cola and Pepsi. In the following event, each firm can choose either to launch a new product or stay with the old model. If both firms launch new products, the payoffs are -40 to each firm. If Cola chooses the new model and its opponent chooses the old, the payoffs are 200 for Cola and 30 for Pepsi. If Pepsi chooses the new model and Cola chooses the old, the payoffs are 40 for Cola and 80 for Pepsi. Both firms get a payoff of 40 if they stay with the old. As a result, the payoffs are given by the following unfinished table. The first payoff is for Cola. Pepsi Cola Old New Old Blank 1 Blank 2 New Blank 3 Blank 4 Which is corect mising payoff blank 1-4 ?
O Macmillan Learning McLaren and Red Bull are competing for the Formula One Constructors' Championship and are deciding whether to increase their spending on their aerodynamic (aero) development. The matrix displays the payoffs to the team that result from each possible choice. Note that, due to other factors, the payoffs are not symmetrical. Assume that each team's goal is to earn as many points as possible. a. Does McLaren have a dominant strategy? If so, what is it? O Yes. Their dominant strategy is to leave aero development spending unchanged. O Yes. Their dominant strategy is to increase aero development spending. O No, they do not have a dominant strategy. b. Does Red Bull have a dominant strategy? If so, what is it? O Yes. Their dominant strategy is to increase aero development spending. Yes. Their dominant strategy is to leave aero Red Bull Raise spending Do not change spending McLaren Increase spending Do not change spending McLaren earns 142 points McLaren earns 360 points…
Which of the following accurately describes a player's strictly dominant strategy? O It is a strategy that is better than all the player's other strategies, no matter what the other players do. There is always at least one player who has one in every game.. O It is the strategy a player uses in the Nash equilibrium of a game. Since a Nash equilibrium always exists, players always have a strictly dominant strategy. O It is a strategy that is better than all the player's other strategies, no matter what the other players do. A player may or may not have one. O It is a strategy that is better than all the player's other strategies, no matter what the other players do. Every player has a dominant strategy in every game.. O It is the strategy a player uses in the Nash equilibrium of a game. Since a Nash equilibrium may not exist, players may not always have a strictly dominant strategy.
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Consider a oligopoly with two firms. Each firm has constant marginal cost of 3 dollar per unit and zero fixed costs. Suppose the market demand curve is P = 15-Q, where Q=Q1+Q2 is the sum of the quantities produced by both firms. Suppose each firm can produce either 1, 2, 3, or 4 units. Which of the following is an optimal collusive outcome for the firms? O Each firm produces 2 units. Each firm produces 4 units. O Each firm produces 3 units. O Each firm produces 1 unit.
4. Consider the following Pricing game. Firms A and B each has two strategies: to charge Low or High price. The following table shows the payoffs for all possible outcomes: Firm B Pricing Strategy Low High Low Firm A 0,0 -200, 400 High 400, -200 100, 100 Suppose that Firms A and B are going to play this game over and over again, forever. Also, suppose both firms agree on the following collusive plan: "We will each charge the high price, provided neither of us has ever charged the low price in any previous period. If one of us cheats and charges the low price, the other player will charge the low price in every period thereafter." Answer the following questions about this infinitely repeated game:
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2. Consider an infinitely repeated game in which, in each period, two firms with zero costs choose quantities and prices are given by: p1 = 1 - q1 - q2/2, p2 = 1 - q2 - q1/2. Firms have a common discount factor of 8 = 1/2. a) Explain what a trigger strategy is and determine whether the firms can attain the joint profit maximising outcome in a subgame perfect equilibrium using trigger strategies. b) Explain what a stick and carrot strategy is and discuss whether it is possible to attain the joint-profit maximising outcome in a subgame perfect equilibrium using stick and carrot strategies.
Calculate the Herfindahl index for a duopoly market where each firm has equal market. Calculate the Herfindahl index for a three-firm oligopoly market in which one firm hasa 80% market share and the other firms each have 10% market share. iii. Calculate the Herfindahl index for a 10-firm oligopoly in which each firm has equal market shares. iv. Which of the above markets is the least competitive? Justify your position.
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In 2018, Delta Air Lines said that it was increasing its fares by 4% because its fuel bill jumped by 33% from the previous yoar. Other airines also announced fare increases. Assuming that these firms are oligopolistic and the outcome is a Nash-Coumot equilibrium, why did the prices rise less than in proportion to the firms' cost? Price rose less than the firms' costs in this oligopoly because O A. demand is not perfectly inelastic. O B. consumers are not price sensitive. OC. the firms are price takers. D. air travel has no close substitutes.
2. Consider the following game: Soapy Inc. and Suddies Inc. are the only producers of soap powder. They collude and agree to share the market equally. If neither firm cheats on the agreement, each makes $1 million profit. If either firm cheats, the cheat makes a profit of $1.5 million, while the complier incurs a loss of $0.5 million. If both cheat, they break even. Neither firm can monitor the other's actions. a) Construct the payoff matrix. b) What is the dominant strategy? c) What is the nash equilibrium for this game?