Question

1.

Timely strategies Cred squares High price Low price 17.5 2.5 Comfort Enter 12.5 0 strategies 25.0 12.5 Don't enter 0 Timely Busines is caming $25.0 milion a year economic profit on a route on which it has a monopoly Comfort Busines 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 ift 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 Comfort believe Timely's threat because OA doos: Comfort would do the same thing is roles were reversed OB. does not Timely will charge a higher price il Comfort enters the market and a lower price if doesn't OC. does not: Timely will charge a higher price regardless of Cornfort's decision OD does it makes good economic sense Comfort the market because O A entors; it will receive profit of $12.5 million rather than 200 O B. does not enter; it will incur an economic loss OC, does not enter it will only break even if enters, and isn't worth the effort D. enters; it will receive profit of $17.5 milion rather than zero

2.

Answer 1

Answer 1.

1. c. does not, Timmy will charge higher price regardless of comfort's decision.

Reason- Irrespective of what Comfort chooses, Timmy always chooses high price as it gives higher payoff.So Timmy's threat is not credible.

2. a. enters, it will receive profit of $12.5 million rather than zero.

reason- When Comfort doesn't enter it receive profit of $0. When Comfort enters it receive profit of $12.5 million. So it's more profitable to enter.

Note-According to HOMEWORKLIB RULES first question can be answered