Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 13, Problem 12P
(a)
To determine
Nash equilibrium for a game between Pat’s and Geno’s.
(b)
To determine
The game tree when Pat’s is the first-mover in an extensive-form game.
(c)
To determine
The process of the extensive form game using backward induction.
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Problem 5.1. The inverse market demand for printer paper is given by P = 400 – 2Q. There are two firms
who compete to produce this paper, each with a marginal cost of production equal to c = 40 over a large
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they each simultaneously choose a quantity to produce (Cournot competition).
Derive the Cournot-Nash equilibrium of this game. Please write final answers in the boxes, showing work in
blank areas.
(a) The reaction function for each firm.
91 (92):
92 (91)
(b) Optimal output q for each firm.
92
=
р
=
=
π1 =
(c) Market price (from demand curve).
(d) Firm profits.
92
=
π2 =
O Cell A
O Cell C
O Cell E
O Cell I
None of the above
Two firms, Snow Kings and Ski Express, at Denver International Airport have franchises to
carry passengers to and from the mountains. These two firms compete through advertising. Their
payoff matrix is below. Profits per customer are represented in the following format (Snow
Kings, Ski Express
Snow Kings
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What combination of strategies achieves the Nash equilibrium in this game?
a) 25,25 (Advertise, Advertise)
b) 15,20 (Advertise, Advertise)
c) 25,0 (Advertise, Don't Advertise)
d) 40,5 (Advertise, Don't Advertise)
Chapter 13 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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