ZuoTi.Pro
Question

Consider the following information for a simultaneous move game: If you advertise and your rival advertises,...

Consider the following information for a simultaneous move game: If you advertise and your rival advertises, you each will earn $5 million in profits. If neither of you advertises, you will each earn $10 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn $15 million and the non-advertising firm will earn $1 million.

a. Draw a payoff matrix for this problem

b. What is the nash equilibrium? Explain.

c. Using the numbers, explain why the companies would want to collude

d. Using the numbers, explain why even if the companies do collude, there is a big incentive to cheat.

business   economics   
1 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

✔ Recommended Answer
Answer #1

1 0
Add a comment
Know the answer?
Add Answer to:
Consider the following information for a simultaneous move game: If you advertise and your rival advertises,...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Consider the following information for a simultaneous move game: Firm Advertise Don't Advertise Advertise 90, 90...

    Consider the following information for a simultaneous move game: Firm Advertise Don't Advertise Advertise 90, 90 500, 50 Firm A Don't Advertise 50, 500 150, 250 If the two firms plan to be in business for 20 years, then the Nash equilibrium is for Each firm to advertise in early years, but not advertise in later years. Both firms to advertise in every year. Neither firm to advertise in early years but to advertise in later years. Both firms to...

  • Consider two firms 1 and 2 engaging into the following one-shot game: if firm 1 advertises...

    Consider two firms 1 and 2 engaging into the following one-shot game: if firm 1 advertises and firm 2 does not, firm 1 will make $20 million in profits and firm 2 will make $6 million. If firm 2 advertises and firm 1 does not, firm 1 will make $2 million and firm 2 will make $6 million. If firm 1 advertises and firm 2 advertises, each firm earns $10 million. If neither firm advertises, firm 2 will make $8...

  • 6. To advertise or not to advertise Suppose that Creamland and Dairy King are the only...

    6. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn’t Advertise Creamland Advertise 8, 8 15, 2 Doesn’t Advertise 2, 15 11, 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make...

  • Attempts: Keep the Highest: 16 11. To advertise or not to advertise Suppose that Creamland and...

    Attempts: Keep the Highest: 16 11. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn't Advertise Advertise Creamland Doesn't Advertise 3,15 11. 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make...

  • 2. Consider the following simultaneous move game: Column Left Right Top 1,1 7,3 Row Bottom 3,5...

    2. Consider the following simultaneous move game: Column Left Right Top 1,1 7,3 Row Bottom 3,5 11,0 (a) Find all pure-strategy Nash equilibria (b) Now assume that the game is made sequential with Row moving first. Illustrate this new game using a game tree and find the rollback equilibrium (c) List the strategies of the two players in this sequential-move game and give the normal-form representation of the game (the payoff matrix) (d) Use the payoff matrix to find the...

  • 2. Consider the following simultaneous move game: Column Left Right 1,1 3,5 11,0 Тoр 7,3 Row...

    2. Consider the following simultaneous move game: Column Left Right 1,1 3,5 11,0 Тoр 7,3 Row Bottom (a) Find all pure-strategy Nash equilibria (b) Now assume that the game is made sequential with Row moving first. Illustrate this new game using a game tree and find the rollback equilibrium (c) List the strategies of the two players in this sequential-move game and give the normal-form representation of the game (the payoff matrix) (d) Use the payoff matrix to find the...

  • 2. Consider the following simultaneous move game Column Left Right 1.1 7,3 3.5 Тор Row Bottom...

    2. Consider the following simultaneous move game Column Left Right 1.1 7,3 3.5 Тор Row Bottom 11.0 (a) Find all pure-strategy Nash equilibria. (b) Now assume that the game is made sequential with Row moving first. Illustrate this new game using a game tree and find the rollback equilibrium. (c) List the strategies of the two players in this sequential-move game and give the normal-form representation of the game (the payoff matrix) (d) Use the payoff matrix to find the...

  • 5. To advertise or not to advertise Suppose that Creamland and Dairy King are the only...

    5. To advertise or not to advertise Suppose that Creamland and Dairy King are the only two firms that sell ice cream. The following payoff matrix shows the profit (in millions of dollars) each company will earn depending on whether or not it advertises: Dairy King Advertise Doesn't Advertise Advertise 10, 10 20, 3 Creamland Doesn't Advertise 3, 20 11, 11 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make...

  • Scenario 17-4. ​ Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises,...

    Scenario 17-4. ​ Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they both advertise, they again split the market, but profits are lower by $10 million since each company must bear the cost of advertising. Yet if one company advertises while the other does not, the one that advertises attracts customers from the other. In this case, the company that advertises earns $60...

  • Use the following payoff matrix for a simultaneous move one shot game to answer the following...

    Use the following payoff matrix for a simultaneous move one shot game to answer the following questions Player 2 Strategy C D E F player 1 A 6, 14 7, 11 18, 20 10, 19 B 12, 5 15, 1 7, 25 16, 17 Does player 1 have a dominant strategy? If yes, what is it? If no, why not? Does player 2 have a dominant strategy? If yes, what is it? If no, why not? Does this game have...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT