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Discuss why cartel members (upon entering into a agreement) often find themselves in a
prisoner’s dilemma situation, show graphical analysis
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- Economics Cournot and Cartels Suppose the demand for pizza in a small isolated town is p = 10 - Q. There are only two firms, A and B, and each has a cost function C(q) = 2 + q. (a) Determine the Cournot-Nash equilibrium quantities and price. How much profit does each firm earn? (b) Suppose the two firms agree to form a cartel, each producing half of the market output. What market output do they decide on, and what price do they charge? What is the profit of each firm? (c) Suppose firm A decides the suddenly break the agreement without firm B realizing it. How much output does firm A produce?Explain how would cartel decide optimal pricing and output, show graphical analysisHow would cartel decide optimal pricing and output
- Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC₂, the short-run Phillips curve that is consistent with these expectations, assuming that it is parallel to SRPC₂- Finally, using the orange point (square symbol labeled "C"), indicate on the previous graph the new, long-run equilibrium for this economy. The inflation rate at point C is unemployment rate at point A. the inflation rate at point A, and the unemployment rate at point C is Was the central bank able to achieve its goal of lowering…Evaluate the following statement: “Predatory pricing in a market is a Nashequilibrium strategy whether or not the incumbent has an advantage; hence, it canwork in practice”. Include diagrams to aid you in your analysis when appropriate.Game theory terminology Select the term that best describes each definition listed in the following table. Definition Nash Equilibrium Dominant Strategy Collusion Tit-for-tat Strategy Payoff Matrix Prisoners' Dilemma Game A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again The event that occurs when agents in a game form an agreement about which strategies to implement A player's best choice, if it exists, regardless of his or her opponent's strategy A case in which individually rational behavior leads to a jointly inefficient outcome
- See page 561 02 Question John and Daniel greatly enjoy each other's company but have different tastes regarding the best form of entertainment. John prefers the lowbrow entertainment of professional wrestling that disgusts Daniel. Meanwhile, Daniel likes highbrow opera, which bores John. However, each finds it preferable to spend the evening together rather than disagree about what to do and end up staying home angry. This interaction is modeled in the normal-form game below: Evening Entertainment John Part 1 Wrestling Opera Choose one or more: Daniel Wrestling 12.00, 4.00 0,0 Identify any pure strategy equilibria of this game. A. (wrestling, wrestling) B. (wrestling, opera) OC. (opera, wrestling) Part 2 Opera 0,0 6.00, 18.00 D. (opera, opera) DE. There are no pure strategy equilibria. Find the mixed strategy Nash equilibrium of this game. In it, John will choose wrestling with probability choose wrestling with probability (Give your answers to two decimal points.) See H See Hir ,and…Select the term that best describes each definition listed in the following table. Definition Nash Equilibrium Dominant Strategy Collusion Tit-for-tat Strategy Payoff Matrix Prisoners' Dilemma Game A case in which individually rational behavior leads to a jointly inefficient outcome A player's best choice, if it exists, regardless of his or her opponent's strategy A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again The event that occurs when agents in a game form an agreement about which strategies to implementSelect the term that best describes each definition listed in the following table. Definition Nash Equilibrium Dominant Strategy Collusion Tit-for-tat Strategy Payoff Matrix Prisoners' Dilemma Game A player's best choice, if it exists, regardless of his or her opponent's strategy A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again A set of strategies (one for each player) in which each player's strategy is the best option for that player, given the chosen strategy of the player's opponents A visual representation of a game showing all possible strategies for each player and all potential outcomes and payoffs
- Provide and briefly explain the various oligopoly models.Breakdown of a cartel agreement Consider a town in which only two residents, Sean and Yvette, own wells that produce water safe for drinking. Sean and Yvette can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Price Quantity Demanded Total Revenue (Dollars per gallon) (Gallons of water) (Dollars) 5.40 0 0 4.95 40 $198.00 4.50 80 $360.00 4.05 120 $486.00 3.60 160 $576.00 3.15 200 $630.00 2.70 240 $648.00 2.25 280 $630.00 1.80 320 $576.00 1.35 360 $486.00 0.90 400 $360.00 0.45 440 $198.00 0 480 0 Suppose Sean and Yvette form a cartel and behave as a monopolist. The profit-maximizing price is $ __________ per gallon, and the total output is __________ gallons. As part of their cartel agreement, Sean and Yvette agree to split production equally. Therefore, Sean's profit is $ __________ , and Yvette's profit is __________ .…tory Bookmarks Profiles Quiz: Module 5 Qu x com/courses/111015/quizzes/852942/take To 9 7 C Tab Window Help Course Modules: Ex Topic: Planet Mon x | For the remaining questions consider two gas stations competing as an oligopoly. There are the only two gas stations in a small town. Each week they must simultaneously display their prices choosing between a high price and a low price. The payoff matrix below displays the weekly profits earned by the gas stations if they choose the various prices. Shell Decisions tv High Price Low Price Low Price NIDZA O V High Price S: $5,000 C: $5,500 (a) If Shell knows Chevron will choose the HIGH PRICE, what price should Shell choose? Low Price S: $7,500 C: $1,500 (b) If Shell knows Chevron will choose the LOW PRICE, what price should Shell choose? Low Price Aa Chevron Decisions (c) Does Shell have a dominant strategy? If so, what is it? Their dominant strategy is to Q Search Securify Module 5 Practice. x | Module 5 Lecture X (d) If Chevron knows…