Question

3. [Normal to Extensive Form Game) Consider the following pricing game between Bernie's Lemon Fizz and Adam's Orange Zip. Bernie can set a high, medium, or low price for the drink while Adam is only considering a High or Low price, and their profits are given by the following table: Adam's Orange Zip High Price Low Price High Price 650, 300 -400, 400 Bernie's Lemon Medium Price 900, 150 100, 100 Low Price 550,-200 200, 100 Fizz a. What is the Nash Equilibrium of the above game when both firms choose price simultaneously? b. Draw a game tree (extensive form game) when Bernie commits to a price first. What is the outcome when Bernie chooses his price first? C. Draw a game tree (extensive form game) when Adam commits to a price first. What is the outcome when Adam chooses his price first? Comnare the different outcomes. Is there an advantage to moving first in this game? d

Answer 1

Adam's arang ip a) Low pee Huja Pauie Malir Pauie Berenie's lanmen Aizz 650 200 400 V0o Poo,150 Low Pric 200 100 -20 0 medu Pw Heh Bri and Iwo Nash Lou puns, loupruis) (650 300) hp Ado Areous an h he (-400400 best rusper 900,15)ngi Bernii HP lamsn LP LP 100/000 Backuard Tndhchor Ddeus He CSTO-200) 200,(09), Berme limen 33 chooses hhAuir 4 Adans ele chasses hagh prs Mygham Ce50,300) Ие ИР M 900,15) Adan LP 3-200 иР (400,400) Cloo/00 200 r00) Adams plays yi i Fi plays Medn Pcack frist e ranani d sams hre aeeur cas /