Firm B Low Price High Price Firm A Low Price 0, 0 50, -10 High Price -10, 50 25,
ID: 3177751 • Letter: F
Question
Firm B
Low Price
High Price
Firm A
Low Price
0, 0
50, -10
High Price
-10, 50
25, 25
Q1 What is the Nash equilibrium of this one-shot game?
Firm A will charge a lower price and firm B will charge a higher price
Firm A will charge a higher price and firm B will charge a higher price
Firm A will charge a higher price and firm B will charge a lower price
Firm A will charge a lower price and firm B will charge a lower price
What is the payoff for each firm in this simultaneous game?
Both firms will earn 25
Firm A will earn 50 and firm B will earn -10
Firm A will earn -10 and firm B will earn 50
Both firms will earn 0
Suppose this is a repeated game where the firms adopt a trigger strategy. What would the trigger strategy look like?
Charge a low price till he charges a low price, then charge a high price
Charge low prices until he charges a high price, and then match
Charge high prices until he charges a low price, then match
Charge a high price till he charges a high price, then charge a low price
Suppose that Firm A cheats, and B does not. What is A's payoff from cheating?
-10
50
0
25
Firm B
Low Price
High Price
Firm A
Low Price
0, 0
50, -10
High Price
-10, 50
25, 25
Explanation / Answer
1. B) firmA will charge higher priceand firm B will charge lower price
2. A) both firms will earn 25
3. A) charge a low price till he charges high price, and then match
4. B) 50
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