Problem VI: Consider the following dynamic game: An entrant chooses whether to enter the market or...
Problem VI: Consider the following dynamic game: An entrant chooses whether to enter the market or stay out. If he chooses to stay out he will get $0, while the incumbent gets $20. If he enters the market, the entrant and the incumbent play the following simultaneous pricing game: they both choose whether to price high or low. If they both price low, they each get $5. If they both price high, they each get $10. If one prices low while the other one prices high, the one who prices low gets $15 and the one who prices high gets $0.
a) Find the sub game perfect nash equilibrium of this game (SPNE=fEnter; Low Low)
b) Find the equilibrium of a modified game where the entrant's outside option is no longer $0, but $10 (SPNE=fStay Out; Low Low)
Homework Answers
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Problem VI: Consider the following dynamic game: An entrant
chooses whether to enter the market or...
3. Find the Bayesian-Nash Equilibrium for the following Entry game." Two firms in same product market Incumbent cho...
3. Find the Bayesian-Nash Equilibrium for the following Entry game." Two firms in same product market Incumbent chooses Build (B) or Don't Build (D) capacity Entrant chooses Enter E or Stay Out S Incumbent has two types, which affect cost of building capacity a = high cost type, and θι low cost type-o, has a higher capacity cost than θ Prior probability of 0h is p. Idea is incumbent earns a higher profit if entrant stays out. So may want...
An incumbent monopolist (M) faces a potential entrant (E). E has to decide whether to enter...
An incumbent monopolist (M) faces a potential entrant (E). E has
to decide whether to enter or stay out. Following the action taken
by E, I has to decide whether to charge a low price or a high
price. The possible outcomes of these decisions are described in
the following payoff matrix.
a) Suppose M threatens to set a low price if E should enter.
Will E believe the threat? Construct a game tree to help explain
your answer. Then...
Consider the following game: there are two players, an incumbent (denoted I) and a potential entrant...
Consider the following game: there are two players, an incumbent (denoted I) and a potential entrant (denoted E) to the market. The entrant has two actions: it can either enter the market in which the incumbent operates, or not enter. The incumbent has two actions: it can either fight the entrant, or accommodate. The payoffs are as follows: if E enters and I fights, E gets -1 and I gets 2. If E does not enter, I gets 10 for...
8. Consider a sequential entry game between an incumbent firm (Firm 1) and a potential entrant...
8. Consider a sequential entry game between an incumbent firm (Firm 1) and a potential entrant (Firm 2). Firm 1 moves first and must choose whether to lobby the government to pass a new safety regulation or lobby the government to reject a new safety regulation. Firm 1 is sufficiently powerful that it gets its way with the regulators. Firm 2 moves second and must choose whether to enter this market and compete with Firm 1 or stay out of...
Once again, two ice cream truck vendors, A and B, are playing a simultaneous pricing game....
Once again, two ice cream truck vendors, A and B, are playing a simultaneous pricing game. If only one of the vendors prices low, he gets all the customers for a payoff of 12, while the other vendor gets no customers and a payoff of zero. If both vendors price high, they each get a payoff of 6. If both price low, they each get a payoff of 5. Suppose that the above game is repeated indefinitely, and together the...
These question builds off the Section 3 Lesson, Practice Problem 2. They are to ensure you...
These question builds off the Section 3 Lesson, Practice Problem 2. They are to ensure you understand key technical definitions before advancing to part 2. Entrant (payoffs on right) Enter Don't enter Price High 20 10 50 o Monopolist (payoffs on left) Price Low 5 -10 10 O This is a simultaneous choice, non-cooperative game. There are four possible outcomes: Outcome 1: Monopolist Prices High, Entrant Enters Outcome 2: Monopolist Prices Low, Entrant Enters Outcome 3: Monopolist Prices High, Entrant...
• An incumbent sells steel and faces a potential entrant. • Inverse demand curve for steel...
• An incumbent sells steel and faces a potential entrant. • Inverse demand curve for steel sales is given by by P = 400 – Q, where Q is the total amount sold by both firms. • The marginal cost to transport one customer is MC = 100 • The entrant incurs fixed costs of F. (a) What are the Cournot prices and quantities in the market, assuming the entrant enters? (b) What are the Stackelberg prices and quantities in...
There are two incumbent firms, F1,F2 and also a potential entrant, F3. The steps of the...
There are two incumbent firms, F1,F2 and also a potential entrant, F3. The steps of the game are: 1. F1 and F2 simultaneously choose outputs q1 ∈ R+ and q2 ∈ R+ respectively. 2. F3 observes q1,q2 and then chooses whether to enter the industry. If she does not, then q3 = 0 and she gets a payoff of zero, but... 3. if she has entered the industry, F3 chooses her own output level, q3 ∈ R+. Inverse demand is...
Please help me solve (e), dont need to do abcd, thank you! 3. Consider the following...
Please help me solve (e), dont need to do abcd, thank
you!
3. Consider the following dynamic game between two firms. First, Firm 1, decides whether to build a high capacity plant or a low capacity plant. Second, Firm 2 sees whether Firm 1 built a high capacity plant or a low capacity plant, and decides whether to enter the market or stay out. If Fimm 2 stays out, it gets a payoff of zero. When Firm 2 stays out,...
mework SP 18 Monopolistic Competition Oligopoly and Game Theory (Ch 11) My Home 4. Using a...
mework SP 18 Monopolistic Competition Oligopoly and Game Theory (Ch 11) My Home 4. Using a payoff matrix to determine the equilibrium outcome Courses show Soose there are only two firms ta m artphones, one and tech. The comany will cam, depending on whether its a high or low price for its phones Browse Catalog Pitch Pricing Partner Offers on Pricing Print Options theo, and tech how t Assume this s h e prices on the high ites a nd...
3. Find the Bayesian-Nash Equilibrium for the following Entry game." Two firms in same product market Incumbent chooses Build (B) or Don't Build (D) capacity Entrant chooses Enter E or Stay Out S Incumbent has two types, which affect cost of building capacity a = high cost type, and θι low cost type-o, has a higher capacity cost than θ Prior probability of 0h is p. Idea is incumbent earns a higher profit if entrant stays out. So may want...
An incumbent monopolist (M) faces a potential entrant (E). E has
to decide whether to enter or stay out. Following the action taken
by E, I has to decide whether to charge a low price or a high
price. The possible outcomes of these decisions are described in
the following payoff matrix.
a) Suppose M threatens to set a low price if E should enter.
Will E believe the threat? Construct a game tree to help explain
your answer. Then...
These question builds off the Section 3 Lesson, Practice Problem 2. They are to ensure you understand key technical definitions before advancing to part 2. Entrant (payoffs on right) Enter Don't enter Price High 20 10 50 o Monopolist (payoffs on left) Price Low 5 -10 10 O This is a simultaneous choice, non-cooperative game. There are four possible outcomes: Outcome 1: Monopolist Prices High, Entrant Enters Outcome 2: Monopolist Prices Low, Entrant Enters Outcome 3: Monopolist Prices High, Entrant...
Please help me solve (e), dont need to do abcd, thank
you!
3. Consider the following dynamic game between two firms. First, Firm 1, decides whether to build a high capacity plant or a low capacity plant. Second, Firm 2 sees whether Firm 1 built a high capacity plant or a low capacity plant, and decides whether to enter the market or stay out. If Fimm 2 stays out, it gets a payoff of zero. When Firm 2 stays out,...
mework SP 18 Monopolistic Competition Oligopoly and Game Theory (Ch 11) My Home 4. Using a payoff matrix to determine the equilibrium outcome Courses show Soose there are only two firms ta m artphones, one and tech. The comany will cam, depending on whether its a high or low price for its phones Browse Catalog Pitch Pricing Partner Offers on Pricing Print Options theo, and tech how t Assume this s h e prices on the high ites a nd...
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