14. The figure below presents information for a one-shot game. Firms B (8.10) What are dominant strategies for firm A and firm B respectively? A. (low price, high price) B. (high price, low price) C. (high price, high price) D. (low price, low price)
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- 2. Find the Nash equilibrium of the game below: Firm B Low Price Medium Price High Price a. Low Price 4,4 6,3 8,2 Firm A Medium Price High Price 3,6 5.5 4,3 2,8 3,4 3,3c) Please find below Pricing options for firm A and B, along with individual payoffs (Firm A’s payoff/Firm B’s payoff)Firm BFirm APrice £2 Price £1Price £2 £10,000/£10,000 £5,000/£12,000Price £1 £12,000/£5,000 £6,000/£6,000Assume you are the pricing manager at Firm A;9i) What is your payoff for a ‘maximin’ strategy?ii) What is your payoff for a ‘maximax’ strategy? iii) Does a dominant strategy exist within this prisoners’ dilemma?1. Consider the pricing game between firm 1 (row) and firm 2 (column) belowwhere each number represents the profits made by each firm.:Table 1: Pricing gameLow HighLow 288,288 360,216High 216,360 324,324 a) Point out the Nash equilibrium. Is this a unique Nash equilibrium?c) What type of commitment can firm 1 make to improve its pay-off?Can it be classified as a threat or promise? (Assume that the commitmentis credible.)d) How would you represent the game as a game tree with the option tocommit?2. Consider the signalling / production game with the order of play given below.Assuming that the signal is informative (i.e. education is sufficiently costly),how would you change the order of the game to make sure that poolingequilibriums are ruled out? Verbally motivate your answer.• Nature chooses ability of the workers a ∈ (H, L), ability is observed byworkers but not employers.• The worker choose an education level s ∈ (0, 1).• The employer offer contracts w(s).• The worker accepts or…
- b 500,0 -10, 30 B 6,-1 0,0 C -1, 20 -20, 100 What is the Nash Equilibrium of this game? A a a. (C, c) O b. (C, b) O c. (A, a) O d. (B, b) C 20, 12 8, -2 7,8003. Determine the Nash Equilibrium for the following normal form of the game. A) MARY B) UP DOWN PLAYER 1 HARLEY UP (10, 10) (4,8) LEFT (3,0) UP MIDDLE (1, 1) DOWN (0,1) DOWN (8,4) (5,5) PLAYER 2 CENTER RIGHT (2,1) (1,1) (4,2) (0,0) (5,0) (0,1)What is the equilibrium of the game below? High End (10,5) High End Winery 2 Cheap Wine (30, 20) Winery 1 a. (High End, (Cheap, High End) O b. (Cheap, (High End, Cheap) Oc. (High End, (High End, Cheap)) O d. (Cheap, (High End, High End) High End Cheap Wine (20,40) Winery 2 Cheap Wine (40,30)
- 6. Consider the simultaneous move pricing game below. Which of the following statements is true concerning this game? a. The game has a dominant strategy (DSSC) solution b. The game has an iterated dominance (IESDS) solution c. The game has more than 1 Nash equilibrium d. None of the above statements are true Firm A Firm B H M L H 30,30 38,12 33,0 M 11,34 18,14 23,1 L 2,24 6,17 14,8250 225 Revenue Lost 200 175 150 Revenue Gained 125 Demand 100 75 50 25 3 4 7 8 9. 10 QUANTITY (Fire engines) Gilberto increase production from 7 to 8 fire engines because the dominates in this scenario. True or False: If Gilberto's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in the same change in the production quantity and, thus, total revenue. O True O False acer Σ 2. 1. PRICE (Thousands of dollars per fire engine)Suppose that the restaurant industry in Honolulu is monopolistically competitive and is currently in Stage 2 equilibrium (firms currently make zero profit). The graph below shows the cost curves for a typical restaurant in this industry. (a) Draw a demand curve and an MR that is consistent with this market being in Stage 2 equilibrium. (b) Show the equilibrium price Now suppose an highly-infectious new virus comes to the island, causing demand for restanrant meals to shift in. (c) What would you expect this change in restaurant demand when the number of firms is fixed? Explain. (d) What would you expect the change in demand to do to the number of meals sold, prices and profits of firms in the long run if firms can enter and exit? What happens to the mumber of restaurants?
- True or False: (D). A monopoly earns total revenue of $5000 when it sells 500 units of output and total revenue of $5400 when it sells 600 units of output. Thus, the marginal revenue of the 600th unit is $9. (E). We call a market where there is only one buyer for a good or service a monopoly. (F). There are a few firms selling differentiated products in a monopolistically competitive industry. (G). When a demand curve is a downward sloping straight line, the slope of the marginal revenue curve is twice as steep as the demand curve.16. A subgame perfect Nash equilibrium is: (a) A process for solving dynamic games by starting at the end and working backwards. (b) A solution concept used in dynamic games of complete information. (c) A method for finding the optimal strategy in a dynamic game. (d) An outcome of a dynamic game which is Pareto optimal. (e) All of the above.15. Which of the following statements about the 'Stag Hunt' game is true? (a) The pure strategy Nash equilibria can be Pareto ranked. (b) All players have a dominant strategy. (c) There cannot be a mixed strategy Nash equilibrium. (d) The surplus maximising outcome is not a Nash equilibrium. (e) None of the above.