Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 13, Problem 12E
To determine
To Ascertain:
Supposing the given condition, explain if the statement satisfies or not with reasons.
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Consider the following game matrix with two players- Player 1 and Player 2 with their respective strategies.
Which of the following statements is correct such as x>y>b>a
Players
Player2
Player 1
A
B
C
D
(Y, Y)
(b, x)
(x, a)
(AE) is the one of many Nash equilibria
(C) is the unique Nash equilibria
(C. D) is the unique Nash equilibria
(A. E) and (B. F) are two Nash equilibria
E
(a, b)
(x, y)
(y, a)
F
(a,x)
(a, b)
(b, b)
Untied and Air ’R’ Us are the only two airlines operating flights between Collegeville and Bigtown. Each airline can charge either a high price or a low price for a ticket. The accompanying matrix shows their payoffs, in profits per seat (in dollars), for any choice that the two airlines can make.
Suppose the two airlines play a one-shot game—that is, they interact only once and never again.
What will be the Nash (noncooperative) equilibrium in this one-shot
game?
Explain why this is the likely outcome.
Now suppose the two airlines play this game twice. Each airline then considers the future and decides on a “tit-for-tat” strategy, that is, it starts off charging the high price in the first period, and then in the second period it does whatever the other airline did in the previous period. If both play this…
Imagine two Pizzerias are playing a static game where the firms have to choose their strategies simultaneously, selecting a strategy that maximizes its profit given what it believes the other firm will do. Their decision is how many pizzas to produce. They can choose between producing 100, 150 or 200 pizzas each. The profit for respective firm is showed in the payoff matrix below.
a) What is the solution (if there is one) and also describe the characteristic features of this game.
b) If this game was played repeatedly, could that potentially change the outcome of the game? In your answer, you are expected to motivate and describe how.
Chapter 13 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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