Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 8DQ
To determine
Zero-sum game and the positive-sum game.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
4. The following payoff matrix shows the profit payoff to firms A and B from combinations of
price strategies HI and LO.
A
НІ
LOW
B
HI
(6, 6)
(16, -5)
LOW
(-7, 15)
(0, 0)
(a) In a one period game, what strategy would each firm follow, and why? Determine the
equilibrium on the one-period game.
(b) Now assume the game is infinite in length. Firm B goes HI in period 1 and continues
with HI so long as A does as well. Firm A is deciding between HI and LO. Determine
the
range of discount rates for which HI is the better choice for Firm A.
18. Answer the next question based on the payoff matrix for a two-firm oligopoly where the
numbers represent the firms' respective profits given each of their pricing strategies:
FIRM Y
O $ 800,000
O $1,000,000
O $1,450,000
Strategies:
High-price
If both firms collude to maximize joint profits,
O $1,250,000
FIRM X
High-price
X = $625,000
Y = $625,000
Low-price X = $275,000
Y = $725,000
Low Price
X = $725,000
Y = $275,000
X = $400,000
Y = $400,000
tal profits for the two firms will be:
5. The following represents the payoffs in a one period game in prices HI and LO.
A
HI
LOW
B
HI
(100, 100)
(200,0)
LOW
(0, 200)
(50, 50)
(a) If A and B were playing this game only once, what strategy should A choose, and why?
(b) A and B are playing the same game an infinite number of times and each has a discount rate
of 50% (.50). Firm B adopts a trigger strategy and selects HI in the first round. What would be
A's present value of profits from cooperation (HI)? What would be its present value from
cheating (LO)? Would A choose to cooperate or cheat?
Chapter 14 Solutions
Economics (Irwin Economics)
Ch. 14.2 - Prob. 1QQCh. 14.2 - The D2e segment of the demand curve D2eD1 graph...Ch. 14.2 - Prob. 3QQCh. 14.2 - Prob. 4QQCh. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQCh. 14 - Prob. 6DQ
Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 1RQCh. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQCh. 14 - Prob. 1PCh. 14 - Prob. 2PCh. 14 - Prob. 3P
Knowledge Booster
Similar questions
- Derive the strategic form of the Mugging game shown, and determine whether any strategies are either strictly dominated or weakly dominated.arrow_forwardTeam 2 plays A Team 2 plays B Team 1 plays A 0, 24 10, 10 Team 1 plays B 4, 4 24, 0 Consider the infinitely repeated version of the game above. Which of the following is the smallest discount factor such that the grim trigger strategy under which team 1 plays A and team 2 plays B until a team deviates, after which team 1 plays B forever and team 2 plays A forever is a Nash Equilibrium? O 1/2 O3/4 O 1/100arrow_forward9arrow_forward
- Suppose O2 and Vodafone are the only two telecommunicationscompanies in UK. Both companies are considering whether ornot to stop offering unlimited data plans. Each company has twostrategies: stop or don’t stop. The first entry in the brackets is the payoffsof O2 and the second entry is the payoffs of Vodafone, both in $million.What will be the dominant strategies of O2 and Vodafone and what willbe the Nash equilibrium? Explain your answers.arrow_forwardNewfoundland’s fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4 Model this situation as a prisoner’s dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement. Provide another environmental example of a prisoner’s dilemma. In many potential prisoner’s dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail- able in many situations involving degradation of the environment.arrow_forwardIs the game shown by Figure 11.3 in the chapter (not this appendix) a zero-sum game or is it a positive-sum game? How can you tell? Are there dominant strategies in this game? If so, what are they? What cell represents a Nash equilibrium and why? Explain why it is so difficult for Uptown and RareAir to achieve and maintain a more favorable cell than the Nash equilibrium in this single-period pricing game.arrow_forward
- 5 Suppose two players play one of the two normal-form games shown in Figure 1. L U 0,-1 D 2,4 R 2,0 6,0 L U | 4,-1 D 2,-2 R 2,0Now suppose that Player 2 knows which game is being played, but Player 1 does not. Find the pure strategy Bayesian Nash equilibrium of this game.arrow_forward2. Consider the following game. Assume that this game is played simultaneously and without collusion. The two companies are choosing between two strategies: go international or stay national. The outcomes of each strategy for each company are given the following payoff matrix: a) Find Nash equilibrium in this game. Interpret the equilibrium you found. b) What is the Chipco's dominant strategy, if it has one? How shall Chipco's payoffs change for it to not have a dominant strategy anymore?arrow_forwardExplain in details , otherwise I will give you downvotearrow_forward
- Discuss intuitively in which situations you think this game is better represented as a simultaneous move game and when it is better represented as a sequential move gamearrow_forwardHow to get the correct answer 0.7271 from the following problem?arrow_forwardSuppose that there are two firms producing a homogenous product and competing in Cournot fashion and let the market demand be given by Q = 240- Assume for simplicity that each firm operates with zero total cost. Find each firm's Cournot Nash equilibrium profit for each firm. $21600 O $19200 O $18000 O $16000arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning