From the following payoff matrix, where the payoffs are the profits or losses of the two firms, determine (a) whether firm A has a dominant strategy, (b) whether firm B has a dominant strategy, (c) the optimal strategy for each firm, and (d) the Nash equilibrium, if there is one.
Firm B
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Low Price High Price
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Low Price (1,1) (3, -1)
Firm A
High Price (-1,3) (4,2)
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Solution Preview
Solution:
(a) whether firm A has a dominant strategy
In case firm B charges a low price,
Firm A will earn a profit of 1 when it charges a low price
Firm A will earn a profit of -1(i.e. a loss of 1) when it charges a high price.
In case firm B charges a high price,
Firm A will make a profit ...
Solution Summary
Solution describes the steps to find out dominant and optimal strategy for each player.
... game and use backward induction to find the subgame ... B: As we know Marge has a dominant strategy, Marge will ... equilibrium is a kind of optimal strategy for games ...
... in a mediator to negotiate this socially optimal solution, how ... Firm A appears to have a dominant strategy (advertise ... the same exercise, you will find that firm ...
... b. Find the ash equilibrium outcomes to this game. ... The optimal strategy for player #1 is to use B ... 2 will choose D, since it is player #2's dominant strategy. ...
... 750 > 500 and 600 > 300) Firm 2 has no dominant strategy. ... constant at MC=0. Find the Market Equilibrium price, quantity ... for y=50 this is the optimal quantity. ...
... In order to find Larry's probability of survival, we ... a. What is Larry's optimal strategy in the first round? ... It's clear that the dominant strategy for both of ...
... 3. First we find the profit function of the ... parties will not achieve the most optimal come because ... There is a dominant strategy and this strategy is advertise ...
... Fiscal regionalism is defined as optimal way through which tax ... by the different regions in order to find out the ... of Homeland Security has a dominant importance ...
... 3: It is a Pareto-dominant equilibrium for both ... but collectively the two managers find it better ... equilibrium, taking into accoimt the optimal final budgeting ...
