Macroeconomics
13th Edition
ISBN: 9780134744452
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 1.1, Problem 3RQ
To determine
Distinction between
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Consider the following Bertrand Duopoly game between Firm A and Firm B.
Firm B
Bertrand Duopoly
Low Price
High Price
Low Price
0,0
5,-1
Firm A
High Price
-1,5
3,3
a. Is there a dominant strategy equilibrium for a one-shot, simultaneous-move
game? If so, what is it? If not, explain why. (2 points)
b. Identify any and all Nash equilibria for a one-shot, simultaneous-move game. (1
point)
c. What is Firm A's secure strategy for a one-shot, simultaneous-move game? What
is Firm B's secure strategy for a one-shot, simultaneous-move game? (2 points)
d. Assume that Firm A and Firm B agree to collude and both charge high prices as
long as neither of them cheats by charging low prices. If one of the firms cheats,
trigger strategies take hold whereby the "victim" punishes the "cheater" by charging
low prices forever after. If this game is infinitely repeated, calculate the interest
rate (i) necessary to sustain collusion. (3 points)
e. Assume that Firm A and Firm B agree to collude and both charge…
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There is Village A where the luxury axiom and the substitution axiom are satisfied (as discussed in Chapter 6). In this village, 200 households and 100 firms exist. Each household is composed of 4 household members: two adults and two children. One of the children is a teenage daughter and the other is a teenage son. The subsistence level of consumption for each individual is s = 2.5.
One of the two adults in each household works on its private land and produces the value of agricultural output a = 3. The other adult earns a wage by working for a firm and decides whether to work at the firm with the two children. Regarding the labour input for firm’s production, one unit of child labour is equivalent to 0.5 units of adult labour. Accordingly, the child wage is half of the adult wage.
Each firm produces output according to the following production function.
Output = 16(Adult Equivalent Labour)^(1/2)
We assume that the adults working on their private lands cannot work for firms. Wages,…
Chapter 1 Solutions
Macroeconomics
Ch. 1.1 - Prob. 1RQCh. 1.1 - Prob. 2RQCh. 1.1 - Prob. 3RQCh. 1.2 - Prob. 1RQCh. 1.2 - Prob. 2RQCh. 1.3 - Prob. 1RQCh. 1.3 - Prob. 2RQCh. 1.3 - Prob. 3RQCh. 1.3 - Prob. 4RQCh. 1.3 - Prob. 5RQ
Ch. 1.4 - Prob. 1RQCh. 1.4 - Prob. 2RQCh. 1.4 - Prob. 3RQCh. 1.4 - Prob. 4RQCh. 1.5 - Prob. 1RQCh. 1.5 - Prob. 2RQCh. 1.5 - Prob. 3RQCh. 1.A - Prob. 1RQCh. 1.A - Prob. 2RQCh. 1.A - Prob. 3RQCh. 1.A - Prob. 4RQCh. 1.A - Prob. 5RQCh. 1.A - Prob. 6RQCh. 1.A - Prob. 7RQCh. 1.A - Prob. 8RQCh. 1.A - Prob. 9RQCh. 1.A - Prob. 10RQCh. 1.A - Prob. 11RQCh. 1.A - Prob. 1SPACh. 1.A - Prob. 2SPACh. 1.A - Prob. 3SPACh. 1.A - Prob. 4SPACh. 1.A - Prob. 5SPACh. 1.A - Prob. 6SPACh. 1.A - Prob. 7SPACh. 1.A - Prob. 8SPACh. 1.A - Prob. 9SPACh. 1.A - Prob. 10SPACh. 1.A - Prob. 11SPACh. 1.A - Prob. 12APACh. 1.A - Prob. 13APACh. 1.A - Prob. 14APACh. 1.A - Prob. 15APACh. 1.A - Prob. 16APACh. 1.A - Prob. 17APACh. 1.A - Prob. 18APACh. 1.A - Prob. 19APACh. 1.A - Prob. 20APACh. 1.A - Prob. 21APACh. 1.A - Prob. 22APACh. 1.A - Prob. 23APACh. 1 - Prob. 1SPACh. 1 - Prob. 2SPACh. 1 - Prob. 3SPACh. 1 - Prob. 4SPACh. 1 - Prob. 5SPACh. 1 - Prob. 6SPACh. 1 - Prob. 7APACh. 1 - Prob. 8APACh. 1 - Prob. 9APACh. 1 - Prob. 10APACh. 1 - Prob. 11APACh. 1 - Prob. 12APACh. 1 - Prob. 13APA
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