EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 12.2, Problem 1.1MQ
To determine
To discuss: On the point that it cannot be a Nash equilibrium if one firm is charging marginal cost and other is charging above the marginal cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
I have constructed a Bertrand game (competition in prices) and presented you with the reaction functions of each firm.
p1 = 12.5 + p2/4
p2 = 5/2 + p1/2
a) Use excel to draw the reaction functions.
b) Solve for the Nash equilibrium
Consider the Bertrand pricing game from class. If both firms have identical marginal cost of $10 and consumers will purchase from whichever firm is cheapest as long as the price is under $50, what will be the Nash equilibrium?.
a 50, 50
b 50, 10
c 10, 10
d 10, 50
Define a dominant strategy and Nash equilibrium. Can two firms interacting with each other have no Nash equilibria if both have a dominant strategy?
Chapter 12 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 12.2 - Prob. 1TTACh. 12.2 - Prob. 2TTACh. 12.2 - Prob. 1MQCh. 12.2 - Prob. 2MQCh. 12.2 - Prob. 1.1TTACh. 12.2 - Prob. 2.1TTACh. 12.2 - Prob. 1.1MQCh. 12.3 - Prob. 1MQCh. 12.3 - Prob. 2MQCh. 12.3 - Prob. 1TTA
Ch. 12.3 - Prob. 2TTACh. 12.3 - Prob. 1.1MQCh. 12.3 - Prob. 2.1MQCh. 12.3 - Prob. 1.1TTACh. 12.3 - Prob. 2.1TTACh. 12.4 - Prob. 1TTACh. 12.4 - Prob. 2TTACh. 12.5 - Prob. 1MQCh. 12.5 - Prob. 2MQCh. 12.5 - Prob. 1TTACh. 12.5 - Prob. 2TTACh. 12.6 - Prob. 1MQCh. 12.6 - Prob. 2MQCh. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - Prob. 10RQCh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Prob. 12.10P
Knowledge Booster
Similar questions
- Two firms operating in the same market must decide between charging a high price or a low price. The Payoffs are as below. Firm A's profit is listed before the comma, B's profit after the comma. Firm B Firm A Low Price High Price Low Price 16, 17 7, 28 High Price 28, 7 22, 22 If each firm tries to choose a price that is optimal, regardless of the other firm's price, what is the Nash equilibrium? Does either firm have a dominant strategy?arrow_forwardFind the subgames, convert them into Normal-Forms, find the Subgame Perfect Nash Equilibrium step-by-step.arrow_forwardThe attached diagram depicts two firms controlled by Jacob and Elsa, and two potential actions each firm might take. Payoffs from action combinations appear in the normal-form depiction of the game played by Jacob and Elsa. What is the Nash equilibrium of the game (Jacob's strategy listed first)? a b Jacob's Actions d Dont' Advertise Advertise, Advertise Advertise Don't Advertise J=300 J=400 Don't advertise, Don't advertise Elsa's Actions Don't advertise (Jacob), Advertise (Elsa) с Advertise (Jacob), Don't Advertise (Elsa) E=200 Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. E=50 Advertise J=100 J=200 E=300 E=100arrow_forward
- Consider the following normal form representation of the standard competition between firm A and firm B. Each firm can choose either standard A or standard B. Their payoffs are given as follows: Firm B A В A Firm A В 1 1 3 1 (1) (10 points) What's Nash equilibrium (NE) in this game? If there are more than one, find them all. But there is no NE, state that there is no NE. (2) (10 points) If you find a NE (or multiple Nash equilibria), is it (or are they) Pareto efficient?arrow_forwardConsider a Stackelberg duopoly:There are two firms in an industry with demand Q = 1 − Pd.The “leader” chooses a quantity qL to produce. The “follower” observes qL and chooses a quantity qF.Suppose now that the cost function is Ci(qi) = qi2 for i = L, F. (a) Find the subgame perfect equilibrium. (b) Compare the equilibrium you found with the Nash equilibrium if the game was simultaneous (i.e., Cournot competition). Is the Nash equilibrium of the Cournot game also a Nash equilibrium of the sequential game? Why or why not?arrow_forwardConsider two firms with a homogeneous product who face the market demand function p = 2 – q1 – 92, where q; and p are the quantities and price. Their constant marginal costs are given by c= 1. The firms compete in quantities in a simultaneous move game. Use this specific example (not a general case) to show that the Nash equilibrium is not Pareto efficient, and the cooperative solution is not an equilibrium (in the sense that both firms have an incentive to cheat). In your answer, use the fact that the firms are identical. Namely, they produce equal amounts (both in the simultaneous move game and in the cooperative case).arrow_forward
- Please no written by hand and no image (Bertrand's duopoly game with discrete prices) Consider the variant of the example of Bertrand's duopoly game in this section in which each firm is restricted to choose a price that is an integral number of cents. Take the monetary unit to be a cent, and assume that c is an integer and a>c+!. Is (c,c) a nash equilibrium of this game? Is there any other nash equilibrium?arrow_forwardGame Theory. Consider a Stackelberg competition game with three firms. Firm 1 chooses q1 first. Firm 2 observes q1 and chooses q2. Firm 3 observes both and chooses q3. These three firms are the only firms in the market, so the sum of their outputs is equal to total market supply, i.e. q1+q2+q3=Q. Suppose demand is given by P=12-Q. For simplicity of calculation, suppose each firm has marginal costs of 0, i.e. c1(q1)=0, c2(q2)=0 and c3(q3)=0. (1) What quantity does Firm 1 produce in the SPNE of the game? (2) What quantity does Firm 2 produce in the SPNE of the game? (3) What quantity does Firm 3 produce in the SPNE of the game?arrow_forwardImagine a small town with three car repair shops competing for a limited number of customers. Explain why the three shops working together to keep their prices high is unlikely to be a Nash equilibrium.arrow_forward
- Three firms compete in the style of Cournot. The inverse demand is P(Q) = a - Q. Scenario 1: All three firms have the same constant marginal cost MC = c. Scenario 2: Firm 1 has MC = 0.5c, Firm 2 has MC = c, and Firm 3 has MC = 1.5c. Assume that a > 3c. Which of the following is correct? (Price means the price in Nash equilibrium.) Price in scenario 1 > Price in scenario 2 Price in scenario 2 > Price in scenario 1 Price in scenario 1 = Price in scenario 2 Any of the first three options is possible depending on the value of a Any of the first three options is possible depending on the value of a and c.arrow_forwardConsider the following Cournot game with two firms i = 1, 2. The demand function is P(Q) = 100 − Q, with Q = q1 + q2. The production costs for firm i are: C(qi) = 400 + 2qi . Find the nash equilibrium of this game. plz answer correct calculatuon asap plz dont answer by pepararrow_forwardI have constructed a Bertrand game (competition in prices) and presented you with the reaction functions of each firm. P2 P1 = 12.5 + 4 P1 P2 == Use excel to draw the reaction functions. Solve for the Nash equilibrium + n INarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc