The dominant strategy for the firms in the duopoly market and establishing the equilibrium strategy combination and the Nash equilibrium for the market. Concept Introduction: Dominant Strategy - The strategy for a player for which he does better in terms of payoffs/profits irrespective of the strategy of the rival, is said to be his dominating strategy. Nash Equilibrium - The strategy combination for the two players which is mutually agreed upon for higher returns such that no one player has an incentive to deviate from it unilaterally, is said to be a Nash Equilibrium. FORD SELLING PRICE → $4,000 $8,000 $12,000 CHEVROLET SELLING PRICE↓ $4,000 8,8 12,6 14,2 $8,000 6,12 10,10 12,6 $12,000 2,14 6,12 7,7

Question

(Game Theory) Suppose there are only two automo- bile companies, Ford and Chevrolet. Ford believes that Chevrolet will match any price it sets, but Chevrolet too is interested in maximizing profit. Use the following price and profit data to answer the following questions. Ford's Chevrolet's Ford's Chevroleť's Selling Selling Profits Profits (millions) $8 Price Price (millions) $ 4,000 4,000 4,000 8,000 8,000 8,000 12,000 12,000 12,000 $ 4,000 8,000 12,000 4,000 8,000 12,000 4,000 8,000 12,000 $8 12 6 14 2 6 12 10 12 10 6 14 6 12 a. What price will Ford charge? b. What price willI Chevrolet charge once Ford has set its price? c. What is Ford's profit after Chevrolet's response?

Answer 1

Question

Chapter 10, Problem 3.9P

To determine

The dominant strategy for the firms in the duopoly market and establishing the equilibrium strategy combination and the Nash equilibrium for the market.

Concept Introduction:

Dominant Strategy- The strategy for a player for which he does better in terms of payoffs/profits irrespective of the strategy of the rival, is said to be his dominating strategy.

Nash Equilibrium- The strategy combination for the two players which is mutually agreed upon for higher returns such that no one player has an incentive to deviate from it unilaterally, is said to be a Nash Equilibrium.

FORD SELLING PRICE → $4,000 $8,000 $12,000

CHEVROLET SELLING PRICE↓

$4,000 8,8 12,6 14,2

$8,000 6,12 10,10 12,6

$12,000 2,14 6,12 7,7

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(Game Theory) Suppose there are only two automo- bile companies, Ford and Chevrolet. Ford believes that Chevrolet will match any price it sets, but Chevrolet too is interested in maximizing profit. Use the following price and profit data to answer the following questions. Ford's Chevrolet's Ford's Chevroleť's Selling Selling Profits Profits (millions) $8 Price Price (millions) $ 4,000 4,000 4,000 8,000 8,000 8,000 12,000 12,000 12,000 $ 4,000 8,000 12,000 4,000 8,000 12,000 4,000 8,000 12,000 $8 12 6 14 2 6 12 10 12 10 6 14 6 12 a. What price will Ford charge? b. What price willI Chevrolet charge once Ford has set its price? c. What is Ford's profit after Chevrolet's response?

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