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 1P
To determine
The dominant strategy, if any of the following.
(a) Astounding
(b) Broadcast
(c)
To determine
Existence of a dominant strategy equilibrium in the two-player game.
(d)
To determine
Existence of a Nash equilibrium.
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Little Kona is a small coffee company that is considering entering a market dominated by Big Brew. Each company’s profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price:a. Does either player in this game have a dominant strategy?b. Does your answer to part (a) help you figure out what the other player should do?c. What is the Nash equilibrium? Is there only one?d. Big Brew threatens Little Kona by saying, “If you enter, we’re going to set a low price, so you had better stay out.” Do you think Little Kona should believe the threat? Why or why not?c. If the two firms could collude and agree on how to split the total profits, what outcome would they pick?
A small town has a duopoly in its tattoo market. Two firms, "Thread the Needle" and "Ink about it" are both competitors. Daily profit is listed in the payoff matrix. The green payouts belong to "Thread the Needle" and the red, "Ink about it".
In this game, what is the Nash Equilibrium?
A
Thread the Needle: don't advertise, Ink about it: don't advertise
B
Thread the Needle: don't advertise, Ink about it: advertise
C
Thread the Needle: advertise, Ink about it: advertise
D
Thread the Needle: advertise, Ink about it: don't advertise
Fill in the chart attached and answer the following questions:
a) Bert's dominant strategy is to: (pick the correct answer below )
- no dominant strategy
- fish for 20 hours per week
-fish for 40 hours per week.
b) Ernie's dominant strategy is to: ( pick the correct answer below)
- no dominant strategy
- fish for 20 hours per week
-fish for 40 hours per week.
c) Is there a Nash Equilibrium? ( pick the correct answer below)
- No
- Yes, both fish for 20 hours per week
- Yes, one fisher for 40 and the other for 20.
- Yes both fish for 30 hours per week.
d) Is there an incentive for Bert and Ernie to collude? Why or why not?
Chapter 13 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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