18) se the following normal-form game to answer the questions below. Player 2 St

Question

18) se the following normal-form game to answer the questions below.

Player 2

Strategy

C

D

Player 1

A

15, 15

40, -10

B

-10, 40

25, 25

a. Identify the one-shot Nash equilibrium.

(Click to select)(A,D)(B,C)(B,D)(A,C)


b. Suppose the players know this game will be repeated exactly three times. Can they achieve payoffs that are better than the one-shot Nash equilibrium?

(Click to select)NoYes


c. Suppose this game is infinitely repeated and the interest rate is 7 percent. Can the players achieve payoffs that are better than the one-shot Nash equilibrium?

(Click to select)YesNo


d. Suppose the players do not know exactly how many times this game will be repeated, but they do know that the probability the game will end after a given play is . If is sufficiently low, can players earn more than they could in the one-shot Nash equilibrium?

(Click to select)NoYes

19) You are the manager of a monopoly that sells a product to two groups of consumers in different parts of the country. Group 1’s elasticity of demand is -6, while group 2’s is -5. Your marginal cost of producing the product is $50.

a. Determine your optimal markups and prices under third-degree price discrimination.

Instruction: Round your answers to two decimal places.

Markup for group 1:

Price for group 1: $

Markup for group 2:

Price for group 2: $

b. Which of the following are necessary conditions for third-degree price discrimination to enhance profits.

Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.

            We are able to prevent resale between the groups.

            There are two different groups with different (and identifiable) elasticities of demand.

            At least one group has elasticity of demand less than one in absolute value.

            At least one group has elasticity of demand greater than 1 in absolute value.

Player 2

Strategy

C

D

Player 1

A

15, 15

40, -10

B

-10, 40

25, 25

Explanation / Answer

The one shot nash equlibrium is - (B,D)

We will first assess the Player A choices for all the choices of B

SO we are left with 40 and 25 payoff for A as these are only highest from 4 options

And for B we are left with 40 and 25

of which only BD option has common value for both B and A so having pay off of 25, 25 and this is the nash equlibrium.

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