If one firm sets a low price while the other sets a high price, the low price firm earns 7000 while high price firm earns 1000 does a prisoners dilemma exist
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If firm A prices high and firm B prices high, they both earn $ 40in profit. If firm A prices low and firm B prices high firm A earns $ 50 and firm B loses $8. If firm A prices high and firm B prices low, firm A will earn $17 and firm B will earn $50.If firm A prices low and firm B prices low, firm A will earn $15 and firm B will earn $30 Is there a dominant strategy? Explain
Breanna O.
In the following duopoly game, the two firms can either set the price of their product high or low. If one firm's price is lower than the other, most of the market will buy from them. This will increase the low-price firm's profit at the expense of the other firm. The game is represented in the table below. 1. The Nash equilibrium for this game is for: A. firm A to sell at a high price and for firm B to sell at a low price B. both firms to sell the product at a high price C. firm A to sell at a low price and for firm B to sell at a high price D. both firms to sell the product at a low price 2. What is the profit firm A will earn if it plays its dominant strategy: A. $800 if firm B has a high price and $1500 if firm B has a low price B. $800 if firm B has a high price and $1250 if firm B has a low price C. $1000 if firm B has a high price and $1500 if firm B has a low price D. $1000 if firm B has a high price and $800 if firm B has a low price
Crystal W.
Drop down for C is i: low or high ii: low or high iii: one-shot game, sequential-move game, repeated game The accompanying payoff matrix presents the profits for Firm A and Firm B under two pricing strategies Firm A's strategy High price Low price Firm A Profit = $83 Firm A Profit =$105 High price Firm B Profit = $83 Firm B Profit =$49 Firm B's strategy Firm A Profit = $49 Firm A Profit = $71 Low price Firm B Profit =$105 Firm B Profit = $71 a. First, suppose this game is indefinitely repeated. What is the optimal long-run strategy for both firms? Firm A will Firm B will Set a high price Set a low price Set a low price Set a high price b. How can either one of the firms enforce the optimal long-run strategy? The firms can decide to alternate setting high prices and low prices each period so they can take turns getting the highest available profit each period. A firm can threaten to set a low price indefinitely if the other firm does not set the high price in the previous period. Both firms will lose out on long-run profits. There is nothing either firm can do to prevent the other from deviating away from the optimal long-run strategy. c. Now suppose this game is finitely repeated. What would the equilibrium strategy for each firm be? Firm A would charge a price, and firm B would charge a price. Since the last period is equivalent to a, the incentives in this period undermine the incentives to cooperate in every period.
Akash M.
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