Econ 112 Take-Home Quiz 3 Chapter 14 Questions Figure #4-Oligopoly (Duopoly) Pay

Question

Econ 112 Take-Home Quiz 3 Chapter 14 Questions Figure #4-Oligopoly (Duopoly) Payoff Matrix Es MFa 100 #40 t210 210 2.00 $200 28, (Using the information in Figure #41, when a one-time game is played, the dominant strategy for West Mfg. is to: A. B. Charge a low price Charge a high price 29, (Using the information in Figure #4). The Nash equilibrium is A. Both firms charge a low price B. C. D. E. A Nash equilibrium does not exist West Mfg charges a low price, East Mfg charges a high price West Mfg charges a high price, East Mfe charges a low price Both firms charge high price 30, (using the information in Figure #4). If the game were repeated 100 times more, the firms would most likely: A. Always play the Nash equilibrium B. Always charge a high price C Sometimes play a high price D. Impossible to determine 31. Firms officially agree to collaboratively set industry output to maximize industry profit. This is known as: A. Tacit collusion B. Nash equilibrium C. Cartel 32. Firms who behave cooperatively to maximize joint profits, but are not actively communicating, are engaging in: A. Overt-collusion B. Nash equilibrium C. Tacit collusion

Explanation / Answer

28 a is correct

Dominant strategy strategy in which a preference is made without the response of other it means that the choice is always same whatever the decision made by other player

29. a is correct

when EAST MFG chooses low price then WEST MFG chooses low price

when WEST MFG chooses low price then EAST MFG chooses Low price, hence low price is Nash equilibrium

30 a is correct

If the stage game has a unique Nash equilibrium as low price then 10 times repeated game also has a unique subgame Nash equilibrium.

31 c is correct

cartel is an association of supplier with the purpose of maintaining prices at high level and restricting competition.

32 c is correct

It occurs when form undergo actions that it likely to minimise the response from others. There is no need of communicating for prices in such collusion

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