. OB and Crown are the duopoly of beer in Korea. These two firms compete head to
ID: 1116856 • Letter: #
Question
. OB and Crown are the duopoly of beer in Korea. These two firms compete head to head in all types of beer in S. Korean market. The following table shows the profit (in millions of won) that each firm earns when it charges different prices for its beer:
Crown
OB
800
880
960
1040
800
180, 180
184, 178
185, 175
186, 174
880
178, 184
183, 183
192, 182
194, 180
960
175, 185
182, 192
191, 191
198, 190
1040
173, 186
180, 194
190, 198
196, 196
a) Do OB and Crown have a dominant strategy?
b) Do OB and Crown have a dominated strategy?
C) if both OB and Crown do not play their dominated strategy and eliminate it, what is the new game?
If both have another dominated strategy, dram game table again.
d) what is the Nash equilibrium in this game?
Crown
OB
800
880
960
1040
800
180, 180
184, 178
185, 175
186, 174
880
178, 184
183, 183
192, 182
194, 180
960
175, 185
182, 192
191, 191
198, 190
1040
173, 186
180, 194
190, 198
196, 196
Explanation / Answer
A) OB and Crown dont have dominant strategy
B)OB and Crown both have dominated strategy as 1040
C) 1040 will not be any startegy for OB and Crown. Thus starting 3,3 strategy.
D) (800,800) is a Nash equilibrium
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