QUESTION 18 Two firms are operating in an oligopoly. Both firms are considering an expansion of their capacity in order to increase profit. The resulting payoffs are shown in the table. The first number in each cell is the payoff of Firm A. Firm B Firm A Expand Expand 20, 50 No Change 40, 70 OB. 25,85 O C. 40, 70 O D. 30, 95 No Change 25,85 30,95 Suppose the game is played sequentially and Firm A has the first move. The equilibrium in the game will be O A. 20, 50

QUESTION 18 Two firms are operating in an oligopoly. Both firms are considering an expansion of their capacity in order to increase profit. The resulting payoffs are shown in the table. The first number in each cell is the payoff of Firm A. Firm B Firm A Expand Expand 20, 50 No Change 40, 70 OB. 25,85 O C. 40, 70 O D. 30, 95 No Change 25,85 30,95 Suppose the game is played sequentially and Firm A has the first move. The equilibrium in the game will be O A. 20, 50

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 3MC

See similar textbooks

Similar questions

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?
Solve for the Nash equilibrium (or equilibria) in each of the following games. (a) The following two-by-two game is a little harder to solve since firm 2’spreferred strategy depends of what firm 1 does. But firm 1 has a dominantstrategy so this game has one Nash equilibrium. Firm 2 Launch Don’tFirm 1 Launch 60, -10 100, 0 Don’t 80, 30 120, 0 What is the Nash equilibrium of this simultaneous-move game? (b) What would the outcome of this game be if instead firm 1 moved first and then, after seeing what firm 1 chose, firm 2 chose it strategy? In this case firm 1 doesn’t necessarily need to choose a best response, but firm 2 must choose a best response since it moves second.
The payoff matrix below is for two firms, A and B, deciding the quantity of their output levels. What is the dominant strategy of each firm? icrosc Firm B Strategy High output Low output High output 100, 80 0, 125 Firm A Low output 65, 0 40, 65 Both firms produce low levels of output. DO cGill Both firms produce high levels of output. Temp Firm A's dominant strategy is to produce low levels of output, but Firm B does not have a dominant strategy. Order Article O Firm B's dominant strategy is to produce low levels of output, but Firm A does not have a dominant strategy. Neither firm has a dominant strategy. oy 00 halysis
The next three questions pertain to the following normal-form game played by Pepsi and Coke: Coke Pepsi → | Advertise Don't 3.3 0,5 Advertise 5.0 Don't 4,4 7. Write in the blank Coke's best response to Pepsi, if Pepsi Advertises, 8. If the firms could collude, what pair of actions would they try and agre0 on (write "Advertise" or "Dont" on the line)? Pepsi: Coke: 9. What are the Nash equilibrium strategies of the firms? Coke: Pepsi:
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)?
Suppose only two airlines, United and Delta, provide flights between Atlanta and Winston - Salem. Both firms must choose whether to advertise or not advertise. The advertising strategies with corresponding profits are depicted in the payoff matrix to the right. United Airline's profits are in blue and Delta Airline's are in red United Airline's dominant strategy is to and Delta Arline's dominant strategy is to What is the Nash equilibrium for this game? O A. United and Delta will both choose not to advertise. O B. United will choose to advertise and Delta will choose not to advertise. < Previous KalturaCapture....dmg tf00002104_wac.docx W
Consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm. If the entrant does not enter ("Out"), the incumbent firm earms a payoff of 10, while the entrant earns a payoff of 0. If the entrant enters ("In"), then the incumbent can either accommodate or fight. If the incumbent accommodates, both eamn a payoff of 5. If the incumbent fights, then the entrant can either leave the industry ("Withdraw") or remain in it ("Stay"). If the entrant stays, both earn a payoff of -5. If the entrant withdraws, the entrant earns a payoff of - 1, and the incumbent earms a payoff of 8. The extensive form of the game is depicted in the following figure, where the payoffs are of the form (Entrant Payoff, Incumbent Payoff). Entrant In Out Incumbent Accommodate Fight O Entrant (5,5) (0,10) Stay Withdraw (-5,-5) (-1,8)
What is the Nash Equilibrium of this game? Firm Develop Don't Develop Don't Develop, Protect O Develop, Don't Protect Protect Don't Develop, Don't Protect O Develop, Protect -3,2 1,1 Government Don't Protect 8,10 0,2
The table given below represents the payoff matrix of firms A and B, when they choose to produce low or high output. In each cell, the figure on the left indicates Firm B's payoffs and the figure on the right indicates Firm A's payoffs. Firm A Firm B Low Output High Output Low Output 60 50 20 10 High Output 30 40 40 30 Which of the following statements about the two firms must be true? 1. If Firm B produces low output, Firm A will also produce low output. 2. If Firm B produces high output, Firm A will produce low output. 3. If Firm A produces high output, Firm B will also produce high output. 4. If Firm A produces low output, Firm B will produce high output.
What are the subgames in the following game ? find all the SPNE