None Refer to the accompanying normal - form game of advertising depicted here. Firm A Firm B Advertise Do Not Advertise Advertise S0, $0 $175, -$100 Do Not Advertise -S100, $175 $125, $125 Suppose there is a 20 percent chance that the advertisinggame depicted shown above will end in the next period. The collusive agreement is Multiple Choice sustainable since $175 < $625. unsustainable since $10 > $50. sustainable since S10 > $50. unsustainable since $175 < $625.

In the given normal-form game, Firm A has two strategies: Advertise and Do Not Advertise. Similarly,…

Answered: Refer to the accompanying normal - form…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to the accompanying normal-form game of advertising depicted here. Firm B Do Not Advertise Advertise Firm A Advertise $0, $0 $175, -$100 Do Not -$100, $175 $125, $125 Advertise Suppose there is a 50 percent chance that the advertising game depicted shown above will end in the next period. The collusive agreement is
38 Refer to the normal-form game of advertising shown below. Firm A Advertise Do Not Advertise Multiple Choice Suppose there is a 10 percent chance that the advertising game depicted in Figure 10-17 will end next period. What is the present value to firm A of agreeing to the strategy (do not advertise, do not advertise]? $237.50 Firm B Advertise $0, $0 $10, $175 $1,250 Do Not Advertise $175, $10 $125, $125
Firm 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…
Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices The payoff matrix shows the profits of the companies in millions based on their possible actions. Company B Increase Price Maintain Price Company A Increase Price $50, $40 $35, 530 Maintain Price 555, $45 $60, $35 The government offers a $5 milon subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy? The Nash equilibrium changes, and both companies will maintain their prices O The Nash equilbrium changes, and both companies will increase their prices O The Nash equilibrium remains the same, and both companies will increase their prices O Company A wit increase its price, whie Company B maintains its price. O Company A will maintain its price, while Company Bincreases ts price.
Expert Q&A Done Suppose there is a small town with two high-end restaurants. Suppose additionally that a major convention is coming to town. The restaurants are deciding whether to create print advertising to distribute at the convention in.order.to advertise their restaurant. If they both advertise, the advertising will cancel and both restaurants will get the same amount of business as if they had not advertised, so the advertising expense will have been wasted, If they both choose not to advertise, they will save the cost of advertising. • If one advertises and the other does not, the advertising restaurant will pull business away from its competitor and will end up with higher revenue. The payoff matrix is below. Restaurant A Advertise Dont Advertise A's Economic Profit =-$3000 A's Economic Profit B's Economic Profit = 0 B's Economic Profit -$3000 A's Economic Profit = $3000 A's Economic Profit = $1000 B's Economic Profit -$3000 B's Economic Proft - $1000 a) Is there a dominant…
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The Old Familiar and The Beehive are the only two bistros in town. Each is trying to decide whether or not it should advertise in the local newspaper. The accompanying payoff table gives their weekly profits under each possible outcome. The Beehive The Beehive does advertise | does not advertise The Old Familiar The Old Familiar earns $X in profits. earns $3,500 in profits. The Old Familiar does advertise The Beehive The Beehive earns $Y in profits. earns $2,250 in profits. The Old Familiar The Old Familiar earns $2,000 in profits. earns $2,500 in profits. The Old Familiar does not advertise The Beehive The Beehive earns $4,000 in profits. earns $3,500 in profits. a. Which combination or combinations of X and Y would make a situation in which The Old Familiar does not advertise and The Beehive advertises a Nash equilibrium? A Nash equilibrium occurs if
A country’s market for new motor vehicles is dominated completely by two firms, Fastcars Ltd and Slowcars Ltd. Market revenue is fixed at $10 billion. Each firm can choose whether to advertise. Advertising costs $1 billion for each firm that advertises. If one firm advertises and the other does not, then the firm that advertises receives 100% of market revenue and pays for its advertising. If both firms advertise, they split the market revenue 50:50 and pay for their respective advertising. If neither advertises, they split the market revenue 50:50 but without the expense of advertising. a) What strategy would you advise that Fastcars Ltd should follow? b) What would you predict will be the strategy chosen by each firm? c) Is there an outcome that would make both firms better off? In case you find that there is such an outcome, is it achievable?
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1. Consider an industry with inverse demand given by p = 8 – q, where p is the price, and q is the quantity. There is one incumbent firm and one potential entrant. In the first stage of the game, the incumbent chooses its quantity qi. In the second stage, the potential entrant observes qi and chooses its quantity Ce. The potential entrant can also decide not to enter the market. The production technology of both firms are represented by the cost function C = 2q. To enter industry implies a fixed entry cost of F. (a) Find the equilibrium of the game, assuming that the potential entrant enters the industry. What are the profits of firms? (b) Assume that entry is not blockaded. For which values of F does the incumbent firm prefer to deter entry? (c) For which values of F, entry blockaded?
Attempts Keep the Highest/3 8. Collusive outcome versus Nash equilibrium Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants disregard health and safety regulations, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they will have to pay workers to do the cleaning. If neither restaurant cleans, each will earn $12,000; alternatively, if they both hire workers to clean, each will earn only $9,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $16,000, and the other restaurant will make only $4,000. Complete the following payoff matrix using the information just given. (Note: All-You-Can-Eat Café and GoodGrub Diner are both profit-maximizing firms.) All-You-Can-Eat Café Cleans Up…

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