The table below shows the payoff matrix of two supermarkets, ABC and XYZ, each has two pricing strategies, to raise price or lower price of groceries. The figures in the matrix show the profits earned by each firm ABC Raise Price Lower Price Raise Price $40m for ABC $37m for XYZ $31m for ABC $28m for XYZ XYZ Lower Price $20m for ABC $33m for XYZ $70m for ABC $56m for XYZ (a) Solve this game using the Nash equilibrium metho and explain whether this game is a prisoner's dilemma game. (b) If the game become a sequential game and ABC g to move first, construct the decision tree diagram and so the sequential game using roll back method.

The table below shows the payoff matrix of two supermarkets, ABC and XYZ, each has two pricing strategies, to raise price or lower price of groceries. The figures in the matrix show the profits earned by each firm ABC Raise Price Lower Price Raise Price $40m for ABC $37m for XYZ $31m for ABC $28m for XYZ XYZ Lower Price $20m for ABC $33m for XYZ $70m for ABC $56m for XYZ (a) Solve this game using the Nash equilibrium metho and explain whether this game is a prisoner's dilemma game. (b) If the game become a sequential game and ABC g to move first, construct the decision tree diagram and so the sequential game using roll back method.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 10P

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