Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 26, Problem 13E
To determine
(a)
To explain:
The interdependence between the pricing strategies of firms A and B using the payoff matrix.
To determine
(b)
To compute:
The solution for the problems faced by the firms.
To determine
(c)
To explain:
The reasons for cooperation is mutually beneficial and the reasons for a firm can cheat.
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Students have asked these similar questions
The following payoff matrix depicts the profits for the only two fırms in this
oligopolistic industry. In each cell, the 1st number is Firm A's profit and the 2nd
number is Firm B's Profit.
Firm B
Low Price
High Price
Firm A
Low Price
$10, $10
$2, $25
High Price
$25, $2
$6, $6
(Scenario: Payoff Matrix for Firms A and B) In the scenario Payoff Matrix for Firms
A and B. If they play the game for 10 times, what will be firm A's pay off if both A
and B will choose "always choosing High price strategy", i.e the firm will always
choose High price each time?
Need more information to tell.
100
60
Firm B
Low Price
High Price
Firm A
Firm B receives $
Low Price
A: $14 million
B: $14 million
High Price
A: $13 million
B: $16 million
A: $16 million
A: $18 million
B: $13 million B: $17 million
The table above shows the payoff matrix for two oligopoly firms deciding the price to charge to
maximize profit. The Pareto outcome occurs when Firm A receives $
million.
million and
Consider two firms who compete with each other in terms of quantity. If the inverse market
demand and total costs of the firms are given by
P = 140 – Q
TC, = 20q, + 10
TC2 = 20q1 + 10
a. Find the Response (Reaction) functions of each curve
b. Find the Nash Equilibrium of this Cournot duopoly game
c. Graphically represent this equilibrium using their Response (Reaction) curves
d. Suppose these two firms collude and form a cartel, what will the equilibrium be under this
situation
e. Is the equilibrium under (d) sustainable or not and why?
f. Suppose that both firms have agreed that firm 1 is a leader and firm 2 is a follower, find
the Nash equilibrium of this sequential game
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