Homework Answers
The Nash equilibrium of this game occurs when both firms choose to cheat. (dominant strategy for both firms is to cheat, this yields them a higher payoff no matter what the other firm chooses to do)
The game is a prisoners'dilemma game (inefficient outcome is obtained)
2) options B and D are correct (these strategies yield the highest payoff for the given firm)
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Firms A and B form a cartel. Once the cartel is formed, each firm has the option of either comply...
EOC 8.1.3 Question Help Firms A and B form a cartel. Once the cartel is formed,...
EOC 8.1.3 Question Help Firms A and B form a cartel. Once the cartel is formed, each firm has the option of either complying with its cartel agreement by keeping its price high and its production low or cheating on the agreement by lowering its price and increasing its production. The adjacent payoff matrix shows the firms' economic profits. Firm B Comply Cheat If the game is played only once, what is the Nash equilibrium? Firm B: $500 Firm B:...
Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs...
Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs a tit-for-tat strategy. The equilibrium is A. Gear cheats and Trick complies with the agreement. B. Trick cheats and Gear complies with the agreement. O c. both firms comply with the agreement OD. both firms cheat on the agreement. O E. one of the firms exits the market. In an oligopoly market, the Herfindahl - Hirschman Index is usually O A. between 100 and...
AA / Suppose that Boeing and Rolls-Royce Holdings are the sole producers of a particular jet...
AA / Suppose that Boeing and Rolls-Royce Holdings are the sole producers of a particular jet engine. The two firms currently charge the same price for their products. If neither firm reduces the price of its engine, each firm earns $36 million in profit. If both firms reduce their prices, then each firm will earn $10 million in profit. If one firm reduces its price and the other does not, then the firm that reduces price will earn a profit...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each fir...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each firm has total costs of C(Q)-7000 +40 Q. (27 points) a) Determine the equilibrium price and quantity in the market. b) Calculate the output each individual firm will produce. c) Calculate the profits each firm will earn. Suppose one firm decides to unilaterally increase output by ten while...
In an oligopoly market, the Herfindahl - Hirschman Index is usually O A. between 100 and...
In an oligopoly market, the Herfindahl - Hirschman Index is usually O A. between 100 and 1,000. O B. zero. O C. below 2,500. D. equal to 10,000 O E. above 2,500. Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs a tit-for-tat strategy. The equilibrium is A. Gear cheats and Trick complies with the agreement. B. Trick cheats and Gear complies with the agreement. O c. both firms comply with the agreement...
Consider two countries need to decide whether to agree to an International Environmental Agreement. The agreement would...
Consider two countries need to decide whether to agree to an International Environmental Agreement. The agreement would provide environmental benefit (value of the environmental benefit per country 12), but countries would incur in cost (cost per country 2). If one country cheats and does not comply with the IEA, but the other does, the cheating country would experience the benefit (12) but not the cost (2) of the agreement. If they both cheat, they stick to the status que and...
Consider a Bertrand duopoly in a market where demand is given by Q firm has constant marginal cost equal to 20 100 - P. Each (a) If the two firms formed a cartel, what would they do? How much profit...
Consider a Bertrand duopoly in a market where demand is given by Q firm has constant marginal cost equal to 20 100 - P. Each (a) If the two firms formed a cartel, what would they do? How much profit would eaclh firm make? (6 marks) (b) Explain why the outcome in part (a) is not a Nash Equilibrium. Find the set of Nash Equilibria and explain why it/they constitute Nash equilibria. (6 marks) (c) Now suppose that instead of...
The payoff matte below shows the payoffs for Fim A and Firm B, each of whom...
The payoff matte below shows the payoffs for Fim A and Firm B, each of whom can other cooperate" or "cheat" The numbers in parentheses are (payoff for Apayoll for ) Firm Cooperate Cheat Firma Coorperate (30,30) Cheat 1x, 10) (20,20) TABLE 11-2 Refer to Table 11 -2.1x40, what is the Nash equilibrium in this game? OA (Fim A cheat, Firm B. cheat) OB (Fim A cooperate, Firm B cooperate) OC. (Fim A chat, Firm B. cooperate) OD. (Firm A...
The table below is the payoff marrix for a simple two-firm game Firms A and B...
The table below is the payoff marrix for a simple two-firm game Firms A and B are bidding on a government contract and each f's bid is not known by the other form. Each firm can bid other $14.000 or 55.000 The cost of completing the project for each firm is 53.000 The low bid firm will win the contractat its stated price the high dem wilgot nothing the two bids are equal, the two firms wil split the price...
(Table: Christie' and Sotheby's) Each cell of this table presents the revenues can the auction houses,...
(Table: Christie' and Sotheby's) Each cell of this table presents the revenues can the auction houses, Christie's and Sotheby's. Revenues are based on the type or commission each firm charges its clients, as well as what commission the other Christie's revenues are listed first in each cell, then Sotheby's. Categy of chan the respection low price. This If both firms cooperate and act like a cartel: Sotheby's will charge a price and Christie's will charge a thing Chich/low price. This...
EOC 8.1.3 Question Help Firms A and B form a cartel. Once the cartel is formed, each firm has the option of either complying with its cartel agreement by keeping its price high and its production low or cheating on the agreement by lowering its price and increasing its production. The adjacent payoff matrix shows the firms' economic profits. Firm B Comply Cheat If the game is played only once, what is the Nash equilibrium? Firm B: $500 Firm B:...
Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs a tit-for-tat strategy. The equilibrium is A. Gear cheats and Trick complies with the agreement. B. Trick cheats and Gear complies with the agreement. O c. both firms comply with the agreement OD. both firms cheat on the agreement. O E. one of the firms exits the market. In an oligopoly market, the Herfindahl - Hirschman Index is usually O A. between 100 and...
. Consider a market with four firms in a cartel agreement which explicitly colludes to set a price by collectively restricting market output. The inverse market demand is P-1000-5 Q, and each firm has total costs of C(Q)-7000 +40 Q. (27 points) a) Determine the equilibrium price and quantity in the market. b) Calculate the output each individual firm will produce. c) Calculate the profits each firm will earn. Suppose one firm decides to unilaterally increase output by ten while...
In an oligopoly market, the Herfindahl - Hirschman Index is usually O A. between 100 and 1,000. O B. zero. O C. below 2,500. D. equal to 10,000 O E. above 2,500. Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs a tit-for-tat strategy. The equilibrium is A. Gear cheats and Trick complies with the agreement. B. Trick cheats and Gear complies with the agreement. O c. both firms comply with the agreement...
Consider two countries need to decide whether to agree to an International Environmental Agreement. The agreement would provide environmental benefit (value of the environmental benefit per country 12), but countries would incur in cost (cost per country 2). If one country cheats and does not comply with the IEA, but the other does, the cheating country would experience the benefit (12) but not the cost (2) of the agreement. If they both cheat, they stick to the status que and...
Consider a Bertrand duopoly in a market where demand is given by Q firm has constant marginal cost equal to 20 100 - P. Each (a) If the two firms formed a cartel, what would they do? How much profit would eaclh firm make? (6 marks) (b) Explain why the outcome in part (a) is not a Nash Equilibrium. Find the set of Nash Equilibria and explain why it/they constitute Nash equilibria. (6 marks) (c) Now suppose that instead of...
The payoff matte below shows the payoffs for Fim A and Firm B, each of whom can other cooperate" or "cheat" The numbers in parentheses are (payoff for Apayoll for ) Firm Cooperate Cheat Firma Coorperate (30,30) Cheat 1x, 10) (20,20) TABLE 11-2 Refer to Table 11 -2.1x40, what is the Nash equilibrium in this game? OA (Fim A cheat, Firm B. cheat) OB (Fim A cooperate, Firm B cooperate) OC. (Fim A chat, Firm B. cooperate) OD. (Firm A...
The table below is the payoff marrix for a simple two-firm game Firms A and B are bidding on a government contract and each f's bid is not known by the other form. Each firm can bid other $14.000 or 55.000 The cost of completing the project for each firm is 53.000 The low bid firm will win the contractat its stated price the high dem wilgot nothing the two bids are equal, the two firms wil split the price...
(Table: Christie' and Sotheby's) Each cell of this table presents the revenues can the auction houses, Christie's and Sotheby's. Revenues are based on the type or commission each firm charges its clients, as well as what commission the other Christie's revenues are listed first in each cell, then Sotheby's. Categy of chan the respection low price. This If both firms cooperate and act like a cartel: Sotheby's will charge a price and Christie's will charge a thing Chich/low price. This...
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