Macroeconomics (7th Edition)
Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 3, Problem 3.3.7PA
To determine

Demand and supply.

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It is illegal for any two firms that sell similar products to engage in price-fixing agreements.  Violating the anti-trust laws can bring both civil and criminal prosecutions.  Nevertheless, price-fixing does take place.   Examples would be found at the service plazas along the NY State Thruway and the NJ Turnpike.  Each location has a small number of fast-food restaurants.  Each fast food restaurant belongs to a different firm, which should create competition, yet at service plazas, all have uncommonly high prices.  Draw a prisoner’s dilemma type of game (2x2) to show the pricing choices and strategies of two competing fast-food restaurants, located at one service plaza.  Payoffs are daily profits.  Create sensible numbers.  Write a brief explanation for the different numbers that you have created.  Identify John Nash’s equilibrium, as well as the optimal outcome for the two fast-food outlets.  Also, find and label any strictly dominant strategies.  Actual long-run pricing results at…
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If the firm is forced to charge the same price in both market, what would be the total number of cars they sell in both markets? Please provide a numerical answer in millions of cars. For example, if the answer is 3,524,000 (3 million and 524 thousand cars), put 3.524 in the answer field.
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