Homework Answers
i)given honda 's low grade move , Mercedes best move is producing high grade vehicle.given honda 's high grade move , Mercedes best move is producing high grade .so irrespective of what honda do, Mercedes best move is high grade in each case.so high grade is dominant strategy for Mercedes.
ii)given Mercedes's low grade move ,honda best move is low grade.given Mercedes's high grade move,honda best move is low grade.so irrespective of what Mercedes do,honda best move in each case is low grade.so low grade is dominant strategy of honda.
iii)nash equilibrium is set of strategy from which any player don't want to deviate given other's player move unchanged.
First outcome :(4,5)=given honda low grade move unchanged , Mercedes has an incentive to move high grade to earn 8.so it is not a nash equilibrium
Second outcome:(5,4)=no company has an incentive to change their move ,given other company move unchanged.so it is a nash equilibrium
Third outcome:(8,6)= no company has an incentive to change their move ,given other company move unchanged.so it is a nash equilibrium
Fourth outcome:(6,2)=given Mercedes's high grade move unchanged ,honda has an incentive to deviate to low grade to earn payoff 6.so it is not a nash equilibrium
So set of strategy:(high grade,low grade),(low grade,high grade) are nash equilibria of the game
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(a) Consider the following game: Mercedes-Benz and Honda are the only two firms in the market...
Question 4 (a) Consider the following game: Mercedes-Benz and Honda are the only two firms in...
Question 4 (a) Consider the following game: Mercedes-Benz and Honda are the only two firms in the market for automobiles. Each firm has two strategies: produce high-grade vehicles or produce low-grade vehicles. The first entry in the bracket is the payoffs (in $billion) of Mercedes-Benz and the second entry is the payoffs of Honda. Honda's Decision Low-grade High-grade Mercedes- Low-grade (4, 5) (5, 4) Benz's Decision High-grade (8, 6) (6, 2) What is the dominant strategy of Mercedes-Benz? ii. What...
GoGo Pizza is producing at the profit-maximizing level of output in a monopolistically competitive market. i...
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3. Find the Bayesian-Nash Equilibrium for the following Entry game." Two firms in same product market Incumbent cho...
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amount to spend on campaign respectively. Each player has three
levels of spending on campaign, low, medium, and high. The payoffs
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Consider a market with two firms, Coke and Pepsi, that produce soft drinks. Both firms must...
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4. (30 Marks) Consider a game in which two firms choose either full scale (F) or...
4. (30 Marks) Consider a game in which two firms choose either
full scale (F) or niche (N) advertising campaigns. The payoffs from
the possible strategy combinations are as follows:
Where x represents costs specific to firm 2 for undertaking a
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Find the Pure Strategy Nash Equilibrium to the game. (10 marks)
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Consider the market for oil. Suppose for simplicity that there are only two oil producing countries—Saudi...
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1. (Normal Form Game) Consider the following game on advertising and price strategy between two local...
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Question 4 (a) Consider the following game: Mercedes-Benz and Honda are the only two firms in the market for automobiles. Each firm has two strategies: produce high-grade vehicles or produce low-grade vehicles. The first entry in the bracket is the payoffs (in $billion) of Mercedes-Benz and the second entry is the payoffs of Honda. Honda's Decision Low-grade High-grade Mercedes- Low-grade (4, 5) (5, 4) Benz's Decision High-grade (8, 6) (6, 2) What is the dominant strategy of Mercedes-Benz? ii. What...
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Consider a two-player game where two candidates choose the
amount to spend on campaign respectively. Each player has three
levels of spending on campaign, low, medium, and high. The payoffs
are summarized in the matrix below. Which of the following
statements is correct?
Candidate A has a strictly dominant strategy.
Candidate B does not have a strictly dominant strategy.
The game does not have an equilibrium in strictly dominant
strategy.
(medium, medium) is a Nash equilibrium.
None of the above....
2. Suppos e there are two firms in an oligopoly, Firm A both firms charge a low price, each earns and Firm B. If $2 million in profit. If both firms charge a high price, each earns $3 million in profit. If one firm charges a high price and one charges a low price, customers flock to the firm with the low price, and that firm earns $4 million in profit while the firm with the high price earns $1...
Consider a market with two firms, Coke and Pepsi, that produce soft drinks. Both firms must choose whether to charge a high price ($1.25) or a low price ($0.85) for their soft drinks. These price strategies with corresponding profits are depicted in the payoff matrix to the right. Coke's profits are in red and Pepsi's are in blue. V, and Pepsi's dominant Coke's dominant strategy is to pick a price of strategy is to pick a price of $ Coke...
4. (30 Marks) Consider a game in which two firms choose either
full scale (F) or niche (N) advertising campaigns. The payoffs from
the possible strategy combinations are as follows:
Where x represents costs specific to firm 2 for undertaking a
full scale advertising campaign.
A) Suppose the cost of the full campaign to firm 2 is x=250.
Find the Pure Strategy Nash Equilibrium to the game. (10 marks)
B) For what values of x is niche a dominant strategy...
Consider the market for oil. Suppose for simplicity that there are only two oil producing countries—Saudi Arabia and Kuwait. Both countries must choose whether to produce a low output or a high output. Kuwait Low Output High Output These output strategies with corresponding profits are depicted in the payoff matrix to the right. Kuwait's profits are in red and Saudi Arabia's are in blue. $120 Suppose the two countries form a cartel. What is the cooperative equilibrium? $70 Low Output...
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