Homework Answers
a) if the two firms above collude, Both firms would agree to choose that strategy which yield the maximum profit to both of them. Therefore, both the firms would agree to keep high price. So if the two forms above collude, the profits for each of the two firms would be: Firm A Profits: 1000 ; Firm B Profits 1000.
b) suppose the firms collude and agree to keep prices high. If firm A cheats and cuts price, it results in(Top Right Cell)– Firm A Profits: 1250 ; Firm B Profits: 300.
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(10 marks: 1 mark each) Use the following payoff matrix for a 2-firm oligopoly to answer...
Question 43 10 pts (10 marks: 1 mark each) Use the following payoff matrix for a...
Question 43 10 pts (10 marks: 1 mark each) Use the following payoff matrix for a 2-firm oligopoly to answer the questions below Firm A: High Price Low Price A-1000 A-1250 High Price B = 1000 B = 300 Firm B: A-300 A = 700; Low Price B-1250 B-700 a. If the two firms above collude, the profits for each of the 2 firms would be: Firm A Profits Firm B Profits a. If the two firms above collude, the...
HdPre LI A-100 A-1250 High Price B-1000 R Firm B A-300 A700. Lower B-1250 B-700 a....
HdPre LI A-100 A-1250 High Price B-1000 R Firm B A-300 A700. Lower B-1250 B-700 a. If the two firms above collude, the profits for each of the 2 firms would be: Firm A Profits 1000 Firm B Profits 1000 b. Suppose the firms collude and agree to keep prices high if firm Acheats and cuts price, it will result in which level of profit for the two forms: Firm A Profits 1250 Firm Profits 300 c. If both firms...
Question 19 10 pts 19. Answer the next question based on the payoff matrix for a...
Question 19 10 pts 19. Answer the next question based on the payoff matrix for a two-firm oligopoly where the numbers represent the firms' respective sales given each of their pricing strategies: FIRM X Strategies: High-price Low Price High-price X = $625,000 X = $725,000 Y= $625,000 Y = $275,000 Low-price X = $275,000 X = $400,000 Y = $725,000 Y= $400.000 FIRMY If both firms were doing a high-price strategy and then one firm cuts prices but the other...
Consider the following payoff matrix for a game in which two firms attempt to collude under...
Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model: Firm B cuts Firm B colludes Firm A cuts 6,6 24,0 Firm A colludes 0,24 L 12,12 Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash...
2. Suppos e there are two firms in an oligopoly, Firm A both firms charge a...
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 the following payoff matrix in which the numbers indicate the profit in millions of dollars...
Consider the following payoff matrix in which the numbers
indicate the profit in millions of dollars for an oligopoly based
on either a high-price or a low-price strategy.
a. Situation
1: Each firm chooses a high-price
strategy.
Result: Each firm
will earn $ 200 million in profit for a total of $ 400 million for
the two firms.
b. Situation 2: Firm X chooses a
low-price strategy while Firm Y maintains a high-price
strategy.
Result: Firm X will earn $250...
) Use the table below to answer the following questions. Table 2 Table 2 gives the...
) Use the table below to answer the following
questions.
Table 2
Table 2 gives the payoff matrix in terms of economic profit for
firms A and B when there are two strategies facing each firm: (1)
charge a low price, or (2) charge a high price.
a) why the equilibrium in this game (played once) is a dominant
strategy equilibrium ?
b) In Nash equilibrium, what the economic profit firm A makes
?
c) If both firms could successfully...
2) Answer the next question based on the following payoff matrix for a duopoly in which...
2) Answer the next question based on the following payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. Firm X High Price Low Price |? | x = s625 | x = $725 >- |- Y = $625 | Y = $475 2 f both fimscollde to maximize joint profits,the total profits for the two firms will be A) S1,500,000. B) S1,400,000. C) S1,250,000. D) S1,200,000.
Firms A and B form a cartel. Once the cartel is formed, each firm has the option of either comply...
Firms A and B form a cartel. Once the cartel is formed, each firm has the option of either complying with its cartel agreement by keeping its price high and its production low or cheating on the agreement by lowering its price and increasing its production. The adjacent payoff matrix shows the firms' economic profits. Firm B Comply Cheat If the game is played only once, what is the Nash equilibrium? Firm B: $600 Firm B: $900 Comply A. The...
6. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms...
6. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smartphones: Flashfone and Pictech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones. Pictech Pricing High High Low Flashfone Pricing Low , 15 8,8 11, 112 15,2 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone...
Question 43 10 pts (10 marks: 1 mark each) Use the following payoff matrix for a 2-firm oligopoly to answer the questions below Firm A: High Price Low Price A-1000 A-1250 High Price B = 1000 B = 300 Firm B: A-300 A = 700; Low Price B-1250 B-700 a. If the two firms above collude, the profits for each of the 2 firms would be: Firm A Profits Firm B Profits a. If the two firms above collude, the...
HdPre LI A-100 A-1250 High Price B-1000 R Firm B A-300 A700. Lower B-1250 B-700 a. If the two firms above collude, the profits for each of the 2 firms would be: Firm A Profits 1000 Firm B Profits 1000 b. Suppose the firms collude and agree to keep prices high if firm Acheats and cuts price, it will result in which level of profit for the two forms: Firm A Profits 1250 Firm Profits 300 c. If both firms...
Question 19 10 pts 19. Answer the next question based on the payoff matrix for a two-firm oligopoly where the numbers represent the firms' respective sales given each of their pricing strategies: FIRM X Strategies: High-price Low Price High-price X = $625,000 X = $725,000 Y= $625,000 Y = $275,000 Low-price X = $275,000 X = $400,000 Y = $725,000 Y= $400.000 FIRMY If both firms were doing a high-price strategy and then one firm cuts prices but the other...
Consider the following payoff matrix for a game in which two firms attempt to collude under the Bertrand model: Firm B cuts Firm B colludes Firm A cuts 6,6 24,0 Firm A colludes 0,24 L 12,12 Here, the possible options are to retain the collusive price (collude) or to lower the price in attempt to increase the firm's market share (cut). The payoffs are stated in terms of millions of dollars of profits earned per year. What is the Nash...
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 the following payoff matrix in which the numbers
indicate the profit in millions of dollars for an oligopoly based
on either a high-price or a low-price strategy.
a. Situation
1: Each firm chooses a high-price
strategy.
Result: Each firm
will earn $ 200 million in profit for a total of $ 400 million for
the two firms.
b. Situation 2: Firm X chooses a
low-price strategy while Firm Y maintains a high-price
strategy.
Result: Firm X will earn $250...
) Use the table below to answer the following
questions.
Table 2
Table 2 gives the payoff matrix in terms of economic profit for
firms A and B when there are two strategies facing each firm: (1)
charge a low price, or (2) charge a high price.
a) why the equilibrium in this game (played once) is a dominant
strategy equilibrium ?
b) In Nash equilibrium, what the economic profit firm A makes
?
c) If both firms could successfully...
2) Answer the next question based on the following payoff matrix for a duopoly in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy. Firm X High Price Low Price |? | x = s625 | x = $725 >- |- Y = $625 | Y = $475 2 f both fimscollde to maximize joint profits,the total profits for the two firms will be A) S1,500,000. B) S1,400,000. C) S1,250,000. D) S1,200,000.
Firms A and B form a cartel. Once the cartel is formed, each firm has the option of either complying with its cartel agreement by keeping its price high and its production low or cheating on the agreement by lowering its price and increasing its production. The adjacent payoff matrix shows the firms' economic profits. Firm B Comply Cheat If the game is played only once, what is the Nash equilibrium? Firm B: $600 Firm B: $900 Comply A. The...
6. Using a payoff matrix to determine the equilibrium outcome Suppose there are only two firms that sell smartphones: Flashfone and Pictech. The following payoff matrix shows the profit (in millions of dollars) each company will earn, depending on whether it sets a high or low price for its phones. Pictech Pricing High High Low Flashfone Pricing Low , 15 8,8 11, 112 15,2 For example, the lower-left cell shows that if Flashfone prices low and Pictech prices high, Flashfone...
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