[Two home-improvement stores (Great Home and Super Home) in a growing urbanarea are interested in expanding their market share. Both are interested inexpanding the size of their store and parking lot to accommodate potential growth intheir customer base. Two possible actions for both the firms are: 'increase the size ofthe store and parking lot' and 'do not increase the size of the store and parking lot'.Payoffs are defined in terms of increase in annual profits in $million. The followingtable describes the payoffs for both the firms to alternative actions taken by each ofthem. Note, Great Home's payoffs are given first and Super Home's payoff are givensecond.]cGreatHomeIncreaseDo notincreaseIncreaseSuper Home($1.5 million, $1m)($0.6m $3.2m)Do not increase($3.4m, $0.4m)($2.5m, $2m)"You can delete this table as well from your submitted file".a) [Let's say, each store is pursuing its own best interest. What will be a rational(or dominant) strategy for Super Home to follow? Explain in 3-4 sentences.What will be a rational (or dominant) strategy for Great Home to follow?Explain in 3-4 sentences.b) [What will be the annual profit growth for each store, if they both follow theirdominant strategy? Define Nash Equilibrium and identify the Nash Equilibriumin the table above.c) [Suppose the owners of Super Home and Great Home meet for a friendlygame of golf one afternoon and happen to discuss a strategy to optimizeprofit. What should the joint strategy be they should both agree to? What willannual profit growth be for each store under this agreement? |

The Dominant strategy is the best course of action irrespective of rival firm strategy. A firm…

o home-improvement stores (Great Home and Super Home) in a growing urban are interested in expanding their market share. Both are interested in anding the size of their store and parking lot to accommodate potential growth in customer base. Two possible actions for both the firms are: 'increase the size of store and parking lot' and 'do not increase the size of the store and parking lot'. offs are defined in terms of increase in annual profits in $million. The following e describes the payoffs for both the firms to alternative actions taken by each of a Noto Great Home's novoffe are given first and Super Home's novoff are given

o home-improvement stores (Great Home and Super Home) in a growing urban are interested in expanding their market share. Both are interested in anding the size of their store and parking lot to accommodate potential growth in customer base. Two possible actions for both the firms are: 'increase the size of store and parking lot' and 'do not increase the size of the store and parking lot'. offs are defined in terms of increase in annual profits in $million. The following e describes the payoffs for both the firms to alternative actions taken by each of a Noto Great Home's novoffe are given first and Super Home's novoff are given

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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Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Film A) is large and the other film (Film B) is small, as the prisoners dilemma box in Table 10.4 shows. Assuming that both films know the payoffs, what is the likely outcome in this case?
15. Consider two competing firms, JR and OG. Suppose OG produces an estab- lished product and JR can either produce a clone or a differentiated product. If JR produces a clone, OG can either sue JR or not sue it. If JR produces a differentiated product rather than a clone, OG can either buy JR or not buy it. The two firms are in a non-cooperative game whose extensive form is rep- resented in the tree diagram below, where the payoffs on the right represent profits. -1 for OG 1 for JR sue OG don't -2 for OG clone sue 1 for JR JR don't clone 1 for OG -1 for JR buy OG don't buy 2 for OG 0 for JR If the two firms' managers are rational and recognize each other as rational, then (a) JR clones and OG sues (b) JR does not clone and OG buys (c) JR does not clone and OG does not buy (d) JR clones and OG does not sue (e) JR clones and OG sues with probability .5
2. Consider a duopoly with firms selling identical goods. Firms are assumed to face a linear demand function, identical constant marginal costs and zero fixed costs. a. Assume decisions are taken in a two stage game. In stage 1, Firm A chooses quantity, in stage 2, Firm B chooses quantity. Use graphical analysis and economic intuition to obtain the Subgame Perfect Nash Equilibrium Strategies. b. What would happen in a) if you add a stage 3 to the above game where firm A can change its quantity? c. Assume now that firms choose prices. Firm A chooses price in stage 1 and Firm B chooses price in stage 2. Use graphical analysis and economic intuition to explain the price consumers will pay d. How would your answer in part c change if firms had different constant marginal costs?
Consider the payoff matrix of Hulu and Netflix. Why don't both firms just raise prices? NETFLIX HULU 15, 15 8, 20 20, 8 10, 10 O It is in each firm's profitable interest to lower prices, no matter what the other competitor does. O Raising prices is illegal in this case. O Firms are concerned about a third competitor entering at higher prices. O Higher prices will increase the number of customers beyond what the firms can handle.
rock paper scissors гock 0. -3 1 рарer 1. -1 scissors -1 3 0. (a) Show that xT= ( ) and yT= (3) together are not a Nash equilibrium 3 3 313 for this modified game. (b) Formulate a linear program that can be used to calculate a mixed strategy x € A(R) that maximises Rosemary's security level for this modified game. (c) Solve your linear program using the 2-phase simplex algorithm. You should use the format given in lectures. Give a mixed strategy x E A(R) that has an optimal security level for Rosemary and a mixed strategy y E A(C) that has an optimal security level for Colin.
1. For the following game Player B Player A Left 7,17 10,5 4,4 Middle Right 14,11 4,3 10,25 21,21 Тop Middle 14,4 Bottom 7,3 a) Determine the Nash equilibrium is any? b) Represent the game sequentially starting with player 1 and determine the sub-game perfect equilibrium c) Represent the game sequentially starting with player 2 and determine the sub-game perfect equilibrium d) Find the mixed strategy Nash equilibrium of the following game e) Firm 1 Firm 2 High price Low price High price 4,3 2,4 Low price 2,4 3,3
5. To advertise or not to advertise Suppose that two firms, Hatte Latte and Bean Bruuer, are the only sellers of espresso in some hypothetical market. The following payoff matrix gives the profit (in millions of dollars) earned by each company depending on whether or not it chooses to advertise: Hatte Latte Advertise Doesn't Advertise Advertise 10, 10 Bean Bruuer 2,18 Doesn't Advertise 18, 2 11, 11 For example, the lower left cell of the matrix shows that if Bean Bruuer advertises and Hatte Latte does not advertise, Bean Bruuer will make a profit of $18 million, and Hatte Latte will make a profit of $2 million. Assume this is a simultaneous game and that Hatte Latte and Bean Bruuer are both profit-maximizing firms. If Hatte Latte chooses to advertise, it will earn a profit of $ does not advertise. If Hatte Latte chooses not to advertise, it will earn a profit of $ Bruuer does not advertise. million if Bean Bruuer advertises and a profit of $ million if Bean Bruuer advertises and a…
◄ Search 12:47 PM Sun Nov 12 ← Note Nov 12, 2023 Uptown's price strategy The Nash equilibrium occurs when High Low LED RareAir's price strategy High $12 $15 The more favorable outcome would be for $12 Tt ✪ $6 B Low $6 D $8. $15 $8 S O both firms have an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the dominant strategy of cell A. 92% neither firm has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the dominant strategy of cell D. O one firm consistently has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the high-price strategy of cell B. O one firm consistently has an incentive to deviate from this strategy given the strategy of the competing firm. It is shown by the high-price strategy of cell C. O the firms to collude and use the high-price strategy but this strategy requires cooperation. O one firm to take the lead and let the…
1. Find Nash equilibrium and equilibrium of dominant strategies. а. N А b. L C P (3;1) (2;3) (10;2) (4;5) (3;0) (2;2) (5;4) U (4;8) (2;3) (3;7) U (6;4) M (0;3) (6;1) (2;2) L (12;3) (-1;5) (9;4) (4;6) (5;6) (4;5) (9;7) E
O Attempt 1 Monopolistic Competition, Oligopoly, and Game Theory: End of Chapter Problems Which of the following are reasons why repeated games make overcoming the Prisoner's Dilemma easier compared to a game played only once? 5. Repeated games O have a payoff structure that is not structured like the classic Prisoner's Dilemma, i.e., where the dominant strategy for both players is to defect. allow players to reap repeated windfalls in consecutive games, preventing opponents from engaging in unfair behavior. V enable players to retaliate against players for unfair behavior. open the game to strategies unavailable to players of games played just once. Incorrect Publisher: Worth Publishers Question Source: Chiang 4e - Economics Principles For A Changing World 11:41 PM 43°F 12/13/2021 a
Consider the following price game: Firm 1 Firm 2 High Low High 20, 20 12, 24 Low 24, 12 14, 14 Remark: In simultaneous move games (games with rows and columns) theconvention is to write the row player’s payoff first and the column player’spayoff second. (a) What is the Nash equilibrium of this game? Recall that for each playeryou should find the best response to each of the opponents’ strategies andunderline the associated payoff. Then look for a cell where both strategiesare best responses to each other. This is a Nash equilibrium. (b) Does either firm have a dominate strategy (a strategy that is always abest response)?
Question Suppose Coca Cola and PepsiCo are producing a new, healthy version of Coke and Pepsi. They are trying to figure out how much of this new soda to produce. They know: (i) If they both produce 10,000 liters a day, they will make the maximum attainable joint economic profit of $200,000 a day, or $100,000 a day each. (ii) If either firm produces 20,000 liters a day while the other produces 10,000 a day, the one that produces 20,000 liters will make an economic profit of $150,000 and the other will incur an economic loss of $50,000. (iii) If both produce 20,000 liters a day, each firm will make zero economic profit. (a) Describe the payoff matrix for the game that Coca Cola and PepsiCo must play. (b) Find the Nash equilibrium of the game that Coca Cola and PepsiCo play.