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Q13 George and Jerry are competitors in a local market. Each is trying to decide if it is
better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will
earn a profit of €3,000. If they both advertise on radio, each will earn a profit of €5,000.
If neither advertises at all, each will earn a profit of €10,000. If one advertises on TV
and the other advertises on radio, then the one advertising on TV will earn €4,000 and
the other will earn €2,000. If one advertises on TV and the other does not advertise,
then the one advertising on TV will earn €8,000 and the other will earn €5,000. If one
advertises on radio and the other does not advertise, then the one advertising on radio
will earn €9,000 and the other will earn €6,000. If both follow their dominant strategy,
then George will:
(a) advertise on TV and earn €3,000;
(b) advertise on radio and earn €5,000;
(c) advertise on TV and earn €8,000;
(d) not advertise and earn €10,000;
Step by step
Solved in 3 steps with 1 images
- Emily and Brooklyn are competitors in a local market. Each is trying to decide if it is better to advertise on TV, on radio, or not at all. If they both advertise on TV, each will earn a profit of $5000. If they both advertise on radio, each will earn a profit of $7000. If neither advertises at all, each will earn a profit of $10,000. If one advertises on TV and the other advertises on radio, then the one advertising on TV will earn $8000 and the other will earn $3000. If one advertises on TV and the other does not advertise, then the one advertising on TV will earn $15,000 and the other will earn $2000. If one advertises on radio and the other does not advertise, then the one advertising on radio will earn $12,000 and the other will earn $4000. If both follow their dominant strategy, what will Emily do and what will she earn? advertise on radio and earn $7000 not advertise and earn $10,000 advertise on TV and earn $5000 advertise on TV and earn $15,000q52 If you advertise and your rival advertises, you each will earn 14 million in profits. If neither of you advertises, you will each earn 20 million in profits. However, if one of you advertises and the other does not, the firm that advertises will earn 10 million and the non-advertising firm will earn 16 million. If you and your rival plan to be in business for only one year, the Nash equilibrium is a. for each firm to advertise. b. for the other firm to advertise and your firm not to advertise. c. for your firm to advertise and the other not to advertise. d. for neither firm to advertise.Question 2 Suppose there are two players, an entrant and an incumbent firm playing the following game: the entrant decides whether to stay out or enter. The incumbent decides whether to innovate or not. If the entrant stays out, the entrant firm gets a payoff of 0 whereas the incumbent firm gets a payoff od 1500, independent of the action of the incumbent firm. If the entrant enters and the incumbent doesn't innovate, the entrant gets 1200 whereas the incumbent gets 500. If the entrant enters and the incumbent innovates, the entrant and the incumbent get a payoff of 1000 each. a) Draw the normal form of the game and solve for the Nash equilibrium/equilibria. b) Suppose the game is dynamic: first the entrant decides whether to enter or stay out. If the entrant enters, the incumbent decides whether to innovate or not. If the entrant stays out, the incumbent doesn't get to play. Draw the extensive form of the fame, mark the subgames on paper and solve for the subgame-perfect Nash…
- 8. Suppose there are two firms (Fr and F2) producing identical product competing for 20 market share and each of which would like to dominate the other, if possible. They faced a choice between defending and cooperating. When either defends or bou cooperate, neither is able to dominate the other. Assuming these preferences are reflected in their profit pay-offs. If both the players choice to defend, their profit will be 1.500 each. When one Firm defends and the other cooperates their profit level will be 5.000 an 1.000 respectively. Similarly, when both cooperate they end up with profit level of 3.000 each. With this in mind: a. Represent the above game in normal form/strategic form. b. Identify the dominant strategy for both firms and the dominant strategy equilibrium. c. Is the above equilibrium Nash equilibrium? Is it Pareto efficient allocation? Why? d. Assuming the game is one-shoot game and Firm 1 moves first represent it in extended formFirm A Strategy Advertise Don't Advertise Firm B Advertise 0,0 -1,40 Don't Advertise 40, -1 10, 10 Two cigarette manufacturers play the following simultaneous-move billboard advertising game. Profit payoffs for both companies are shown in the normal form game below. There is a 20 percent chance that the government will ban cigarette sales in any given year. If they collude and Firm A cheats, how much will Firm A earn in period 1? (Enter a numerical value as your answer with no decimal points. For example, if your answer is "one hundred" you need to type in "100"). What is the probability that the game will end? (Enter a numerical value as your answer with no decimal points. For example, if your answer is "one hundred percent" you need to type in "100"). If they collude and Firm A cheats, what will be the profit for Firm A for all periods? (Enter a numerical value as your answer with no decimal points. For example, if your answer is "one hundred" you need to type in "100"). If they…Thelma and Louise are competitors in a local beer market and each is trying to decide if it is worthwhile to advertise. If both of them advertise, each will earn a profit of $2000. If neither of them advertises, each will earn a profit of $5000. If one advertises and the other doesn't, then the one who advertises will earn a profit of $7500 and the other will earn a profit of $1000. To make the most money, what should Thelma do and how much profit will she earn? Select one: a. she should advertise, and she will earn $7500 b. she should do whatever Louise does, and will earn either $2000 or $5000 C. she should not advertise, and she will earn $5000 d. she should advertise, and she will earn $2000 Next page
- 6. There are 2 players who have to decide how to split one dollar. The bargaining process works as follows. Players simultaneously announce the share they would like to receive $₁ and $2, with 0 ≤ $1, S2 ≤ 1. If $1 + $2 ≤ 1, then the players receive the shares they named and if 8₁ + 82 > 1, then both players fail to achieve an agreement and receive zero. Which of the following strategy profiles is a pure strategy Nash equilibrium? O a) (0.3, 0.7); Ob) (0.5, 0.5); O c) (1.0, 1.0); Od) All of the aboveAn incumbent can commit to producing a large quantity of output before the potential rival decides whether to enter. The incumbent chooses whether to commit to produce a small quantity or a large quantity. The rival then decides whether to enter. Enter The payoffs are represented in the game treeillustrated in the figure to the right. What is the subgame perfect Nash equilibrium? (1,800,500) Rival Small O A. The Nash equilibrium is for the incumbent to produce the large quantity and for the rival to not enter regardless of the incumbent's quantity. (3,600,0) Don't enter O B. The Nash equilibrium is for the incumbent to produce the large quantity and for Incumbent the rival to enter regardless of the incumbent's quantity. OC. The game does not have a Nash equilibrium. O D. The Nash equilibrium is for the incumbent produce the small quantity and for Enter (1,600, - 80) Large Rival the rival to only enter if the incumbent produces the small quantity. (3,200,0) Don't enter O E. The Nash…Dairy King Advertise Doesn't Advertise Advertise 7,7 12, 3 Creamland Doesn't Advertise 3, 12 10, 10 For example, the upper right cell shows that if Creamland advertises and Dairy King doesn't advertise, Creamland will make a profit of $12 million, and Dairy King will make a profit of $3 million. Assume this is a simultaneous game and that Creamland and Dairy King are both profit-maximizing firms. If Creamland decides to advertise, it will earn a profit of not advertise. million if Dairy King advertises and a profit of million if Dairy King does If Creamland decides not to advertise, it will earn a profit of does not advertise. million if Dairy King advertises and a profit of million if Dairy King If Dairy King advertises, Creamland makes a higher profit if it chooses If Dairy King doesn't advertise, Creamland makes a higher profit if it chooses Suppose that both firms start off not advertising. If the firms act independently, what strategies will they end up choosing? ◇ Creamland will…
- Suppose that two firms, firm A and firm B, are competing in the market. Assume that each firm has two strategies available: “no promotion” and “extensive promotion”. If both firms choose “no promotion”, each firm will get a payoff of 8000. If both firms choose “extensive promotion”, each firm will get a payoff of 5000. If one firm chooses “no promotion” and the other firm chooses “extensive promotion”, the firm that chooses “no promotion” will get a payoff of 4000 and the firm that chooses “extensive promotion” will get a payoff of 10000.a. Assume the game is a 2-players one-shot simultaneous game, please develop the normal form of this game by showing the players, the strategies and the payoffs. b. Follow part (a), determine the dominant strategy of firm A. c. Follow part (a), determine the dominant strategy of firm B. d. Follow part (a), determine the equilibrium of this game. e. If the game becomes an infinitely repeated game, what do you expect to happen?Consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm. If the entrant does not enter ("Out"), the incumbent firm earms a payoff of 10, while the entrant earns a payoff of 0. If the entrant enters ("In"), then the incumbent can either accommodate or fight. If the incumbent accommodates, both eamn a payoff of 5. If the incumbent fights, then the entrant can either leave the industry ("Withdraw") or remain in it ("Stay"). If the entrant stays, both earn a payoff of -5. If the entrant withdraws, the entrant earns a payoff of - 1, and the incumbent earms a payoff of 8. The extensive form of the game is depicted in the following figure, where the payoffs are of the form (Entrant Payoff, Incumbent Payoff). Entrant In Out Incumbent Accommodate Fight O Entrant (5,5) (0,10) Stay Withdraw (-5,-5) (-1,8)When two cats, Euclid and Jamie, play together, their game involves facing each other while several feet apart; each cat must then decide whether to pounce or to "freeze-to stay motionless und the other cat pounces. Euclid weighs 2 lb more than Jamie, so if they both pounce, Jamie is squashed and Euclid gains 6 points. If they both freeze, Euclid remains in control of the area and gains 2 points. If Euclid pounces while Jamie freezes, Jamie can put up a good defense, so Euclid gains only 1 point. Euclid is poor at defense, so if he freezes while Jamie pounces, he loses 1 point. Find the optimum strategy for each cat, and find the value of the game for Euclid. Construct the payoff matrix M = Euclid m11 12 M21 22 Jamie Pounce Freeze Pounce Freeze Euclid should pounce with probability (Type integers or simplified fractions.) and freeze with probability Jamie should pounce with probability and freeze with probability (Type integers or simplified fractions.) The value of the game for…
