14. (Figure: Payoff Matrix for Alex and Sybil) Use Figure: Payoff Matrix for Alex and Sybil. Alex and Sybil are the only producers of frozen yogurt in their town. Every week, each decides whether to price high or low for the following week. The figure shows the profit per week earned by the two businesses. Suppose the firms each decide to price high initially and adopt a Grim Trigger strategy for the following weeks. After a few weeks, Alex's weekly profit would be Payoff Matrix for Alex and Sybil and Sybil's weekly profit would be Alex charges a high price Alex earns $1,000 per week Sybil earns $1000 per week Alex earns $200 per week Sybil earns $1,500 per week Sybil charges a high price Sybil charges a low price a. $800; $800 b. $1,000; $1,000 c. $1,500; $200 d. $200; $1,500 Alex charges a low price Alex earns $1,500 per week Sybil earns $200 per week Alex earns $800 per week Sybil earns $800 per week

14. (Figure: Payoff Matrix for Alex and Sybil) Use Figure: Payoff Matrix for Alex and Sybil. Alex and Sybil are the only producers of frozen yogurt in their town. Every week, each decides whether to price high or low for the following week. The figure shows the profit per week earned by the two businesses. Suppose the firms each decide to price high initially and adopt a Grim Trigger strategy for the following weeks. After a few weeks, Alex's weekly profit would be Payoff Matrix for Alex and Sybil and Sybil's weekly profit would be Alex charges a high price Alex earns $1,000 per week Sybil earns $1000 per week Alex earns $200 per week Sybil earns $1,500 per week Sybil charges a high price Sybil charges a low price a. $800; $800 b. $1,000; $1,000 c. $1,500; $200 d. $200; $1,500 Alex charges a low price Alex earns $1,500 per week Sybil earns $200 per week Alex earns $800 per week Sybil earns $800 per week

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Oligopoly

Section: Chapter Questions

Problem 9PA

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4. Consider the following Pricing game. Firms A and B each has two strategies: to charge Low or High price. The following table shows the payoffs for all possible outcomes: Firm B Pricing Strategy Low High Low Firm A 0,0 -200, 400 High 400, -200 100, 100 Suppose that Firms A and B are going to play this game over and over again, forever. Also, suppose both firms agree on the following collusive plan: "We will each charge the high price, provided neither of us has ever charged the low price in any previous period. If one of us cheats and charges the low price, the other player will charge the low price in every period thereafter." Answer the following questions about this infinitely repeated game:
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2. Philip Morris and R.J. Reynolds spend huge sums of money each year to advertise their tobacco products in an attempt to steal customers from each other. Suppose each year Philip Morris and R.J. Reynolds have to decide whether or not they want to spend money on advertising. If neither firm advertises, each will earn a profit of $2 million. If they both advertise, each will earn a profit of $1.5 million. If one firm advertise and the other does not, the firm that advertises will earn a profit of $2.8 million and the other firm earn $1 million.c. Use a payoff matrix to depict this problem.d. What is the dominant strategy for Philip Morris and R.J. Reynolds?e. What is the Nash Equilibrium without an enforceable contract?
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3) Suppose the profits for two firms is given below in the payoff matrix based on whether they offer their product at a low price, a medium price, or a high price. Kringle's Krunchees (2nd #) Med Low High Nick's Noshes (1st #) Low 100,150 120, 100 140, 80 Med 80, 200 140, 180 200, 160 High 50, 220 70, 200 160, 240 a) Does either firm have a dominant strategy? If so, what is it? b) What is the simultaneous game Nash Equilibrium? c) What would be the payout for Nick if he were to move first? d) What would be the payout for Kringle if he were to move first? e) Is there an agreement that you could suggest that would make both better off? Remember to look to see whether both would enter and abide by the agreement!
Macmillan Learning You notice that the prices of coffee at your local supermarket vary from week to week, causing you to buy different brands, depending on which is cheaper that week. Your friend William, by contrast, is a hardcore Peet's fan and buys only Peet's, whether the price is $5.99 per pound or $12.99 per pound. By varying coffee prices, the supermarket sells both to you, who is relatively price particular about coffee, and to William, who is relatively price and and particular about coffee. O sensitive; less; insensitive; more insensitive; more; sensitive; less sensitive; more; insensitive; less insensitive; less; sensitive; more Incorrect
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At a time when demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg's was quoted as saying, “. for the past several years, our individual company growth has come out of the other fellow's hide." Kellogg's has been producing cereal since 1906 and continues to implement strategies that make it a leader in the cereal industry. Suppose that when Kellogg's and its largest rival advertise, each company earns $0 billion in profits. When neither company advertises, each company earns profits of $10 billion. If one company advertises and the other does not, the company that advertises earns $52 billion and the company that does not advertise loses $2 billion. For what range of interest rates could these firms use trigger strategies to support the collusive level of advertising? Instruction: Enter your response as a percentage rounded to the nearest whole number. percent