You operate in a duopoly in which you and a rival must simultaneously decide what price...
You operate in a duopoly in which you and a rival must simultaneously decide what price to advertise in the weekly newspaper. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3. If you charge different prices, the one charging the higher price loses $5 and the one charging the lower price makes $5.
|
Your Rival |
|||
|
Low Price |
High Price |
||
|
Low Price |
(0, 0) |
(5, −5) |
|
|
You |
High Price |
(−5, 5) |
(3, 3) |
(a) Find the Nash equilibrium for a one-shot version of this game.
(b) Now suppose the game is infinitely repeated. If the interest rate is 10 percent, can you do better than you could in a one-shot play of the game? Explain.
(c) Explain how "history" affects the ability of firms in this game to achieve an outcome superior to that of the one-shot version of the game.
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You operate in a duopoly in which you and a rival must
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4. (10 points) At a time when cereal maker Kellogg's demand for ready-to-eat cereal was stagnant,...
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4. (10 points) At a time when cereal maker Kellogg's demand for ready-to-eat cereal was stagnant,...
4. (10 points) At a time when cereal maker Kellogg's demand for ready-to-eat cereal was stagnant, a spokesperson for the cereal maker Kellogg's was quoted as saying, “.....for the past several years, our individual company growth has come out of the other fellow's hide." Kellogg's has been producing cereal since 1906 and continues to implement strategies that make a leader in the cereal industry. The payoff matrix for Kellogg and its rival to advertise or “don't advertise” is given below...
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Refers to gametheory strategy
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