Firm B 0-50 0-10 0-5 Concede that cigarette smoke causes lung cancer 0-20 Firm A Concede that cigarette Argue that there is no smoke causes lung evidence that smoke cancer causes cancer Firm A profit=-$20 b Firm B profit=-$15 b If both firms follow a dominant strategy. Firm A's profits (losses) will be Fim A profit= 550 6 Fm B profit = $5 b Argue that there is no Firm A profit=-$5b Firm A proft = $10 6 evidence that smoke Firm B profit=-550 b Fim B profit=$106 causes cancer

Firm B 0-50 0-10 0-5 Concede that cigarette smoke causes lung cancer 0-20 Firm A Concede that cigarette Argue that there is no smoke causes lung evidence that smoke cancer causes cancer Firm A profit=-$20 b Firm B profit=-$15 b If both firms follow a dominant strategy. Firm A's profits (losses) will be Fim A profit= 550 6 Fm B profit = $5 b Argue that there is no Firm A profit=-$5b Firm A proft = $10 6 evidence that smoke Firm B profit=-550 b Fim B profit=$106 causes cancer

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter10: Monopolistic Competition And Oligopoly

Section: Chapter Questions

Problem 4SCQ: Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly...

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fnan421 WWord Gozden Geç r Gorunum Varc m Ne yaomak steci gnz soy evn 1) Two firms, X and Y, are planning to market their new products. Each firm can develop either TV or Laptop. Market research indicates that the resulting profits to each firm for the alternative strategies are given by the following payoff matrix: FIRM Y TV LAPTOP FIRM X TV 30, 30 50, 35 LAPTOP 40,70 20, 20 A) If both firms make their decisions at the same time and follow maximin (low-risk) strategies, what will the outcome be? B) Suppose both firms try to maximize profits, but Firm X has a head start in planning, and can commit first. Now what will the outcome be? What will the outcome be if Firm Y has a head start in planning and can commit first? I
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Two firms dominate the market for surgical sutures and competeaggressively with respect to research and development. The followingpayoff table depicts the profit implications of their different R&Dstrategies.a. Suppose that no communication is possible between the firms; eachmust choose its R&D strategy independently of the other. Whatactions will the firms take, and what is the outcome?b. If the firms can communicate before setting their R&D strategies,what outcome will occur? Explain.Firm B’s R&D SpendingLow Medium HighLow 8, 11 6, 12 5, 14Firm A’s R&D Medium 12, 9 8, 10 6, 8 SpendingHigh 11, 6 10, 8 4, 6
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