Question

Question 1:

Timely strategies (red squares) High price Low price 10.5 1.5 Timely Busines is earning $15.0 million a year economic profit on a route on which it has a monopoly. Comfort Buslines is considering entering the market and operating on this route. Timely threatens to cut the price to the point at which Comfort will make no profit if it enters. Comfort determines that the payoff matrix for the game with Timely is the one shown in the table. >>> The numbers given are in millions of dollars. Does Comfort believe Timely's assertion? Does Comfort enter or not? Explain. Enter 7.5 7 Comfort strategies (blue 0 15.0 7.5 squares) Don't enter 0 0 Comfort believe Timely's threat because Comfort the market because O A. does; Comfort would do the same thing if roles were reversed O B. does not; Timely will charge a higher price if Comfort enters the market and a lower price if it doesn't OC. does; it makes good economic sense D. does not; Timely will charge a higher price regardless of Comfort's decision A. enters; it will receive profit of $10.5 million rather than zero B. does not enter; it will only break even if it enters, and it isn't worth the effort OC. enters; it will receive profit of $7.5 million rather than zero O D. does not enter; it will incur an economic loss

Answer 1

Timely, High price is strictly dominant 15) 715, 17 for strategy and as 1015 > 1.5 will always choose High so be a timely price higher price the market becaune e Comfort does not beleeue Timely's assertion. Moreat because Timely will change regardless of Can Comfort's decision Amy D Comfort enhers it will receive prefit of $7.5 million rather than zero, Amd As develop is the stra strictly dominant strategy for both players. prosty and equ (develop, Develop) gines louis lover pay off } It is possible for coopuation in this research and development game if the game is played repeatedly and cheating on the agreement is punished uring and 3 y 1. as oy -0.5 m nash 7 tit fortat strategy