Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another, Both firms, Big Aluminium Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not.The table below shows payoffs for the firms under various scenarios. The first number in each cell is the payoff of LAG.Suppose the game is played once and each firm has to make its decision simultaneously. Does BAG have a dominant strategy? Explain clearly. Does LAG have a dominant strategy? Explain clearly.Big Aluminium Giant (BAG)Don't Expand3, 44, 2ЕxpandLittle Aluminium GiantDon't Expand2, 3Expand1, 1For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).

In game theory, strategic dominance arises when one strategy outperforms another for a single…

Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another. Both firms, Big Aluminium Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not. The table below shows payoffs for the firms under various scenarios. The first number in each cell is the pavoff of LAG. Suppose the game is played once and each firm has to make its decision simultaneously. Does BAG have a dominant strategy? Explain clearly. Does LAG have a dominant strategy? Explain clearly. Big Aluminium Giant (BAG) Don't Expand Expand Little Aluminium Giant Don't Expand 3, 4 4, 2 2, 3 Expand 1, 1 For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).

Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another. Both firms, Big Aluminium Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not. The table below shows payoffs for the firms under various scenarios. The first number in each cell is the pavoff of LAG. Suppose the game is played once and each firm has to make its decision simultaneously. Does BAG have a dominant strategy? Explain clearly. Does LAG have a dominant strategy? Explain clearly. Big Aluminium Giant (BAG) Don't Expand Expand Little Aluminium Giant Don't Expand 3, 4 4, 2 2, 3 Expand 1, 1 For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac).

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter15: Strategic Games

Section: Chapter Questions

Problem 8MC

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Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another. Both firms, Big Aluminium Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not. The table below shows payoffs for the firms under various scenarios. The first number in each cell is the payoff of LAG. Suppose the game is played sequentially and LAG make their decision first. What are the payoffs to each firm in the equilibrium of this game? Big Aluminium Giant Don't Expand Expand Little Aluminium Giant 1, 4 Don't Expand Expand 2, 3 3, 1 2, 2 O A. 2, 3 OB. 3, 1 OC.1, 4 OD. 2, 2 E. There is no equilibrium in this game
Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($400) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the bavoli matris to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350, then Dell will match that price and also charge $350. What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? Assuming HP and Dell can coordinate to maximize profits, HP's profit will change by $ and Dell's profit will change by (Enter either positive or negative numeric responses using integers.) Price $400 Dell Price $350 HP Price = $400 Price $350 $80 $90 $80 $20 $20 $50 $90 $50 G
Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. Kellogg What is the cooperative equilibrium for this game? $4.00 Price = $2.50 Price = O A. The cooperative equilibrium is for Kellogg to choose a price of $2.50 and $800 $50 Post to choose a price of $4.00. Price = $4.00 $800 %3D OB. The cooperative equilibrium is for Kellogg and Post to both choose a price 006$ of $2.50. Post C. The cooperative equilibrium is for Kellogg and Post to both choose a price of $4.00. Price = $2.50 $350 OD. The cooperative equilibrium is for Kellogg to choose a price of $4.00 and Post to choose a price of $2.50. %3D $50 $350 OE. A cooperative equilibrium does not exist for this game. Is the cooperative equilibrium likely…
Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another. Both firms, Big Aluminium Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not. The table below shows payoffs for the firms under various scenarios. Suppose the game is played sequentially and LAG make their decision first. What are the payoffs to each firm in the equilibrium of this game? first number in each cell is the payoff of LAG. Big Aluminium Giant Don't Expand Expand Little Aluminium Giant Don't Expand 2, 3 1, 4 Expand 3, 1 2, 2 OA. 2, 3 OB. 3, 1 OC. 1,4 OD.2, 2 OE. There is no equilibrium in this game
Imagine that there are two snowboard manufacturers (FatSki and WideBoard) in the market. Each firm can either produce ten or twenty snowboards per day. The table below (see attached) shows the profit per snowboard for each firm that will result given the joint production decisions of these two firms. Draw the game payoff matrix for this situation. Does either player have a dominant strategy? If so, what is it? What is the Nash equilibrium solution and how many boards should each player produce each day? Since FatSki and WideBoard must play this game repeatedly (i.e. make production decisions every day), what strategy would you advise them to play in order to maximize their payoff over the long term?
Consider a market with two firms, Kellogg and Post, that sell breakfast cereals. Both companies must choose whether to charge a high price ($4.00) or a low price ($2.50) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. Kellogg What is the cooperative equilibrium for this game? Price = $4.00 Price = $2.50 O A. The cooperative equilibrium is for Kellogg to choose a price of $2.50 and Post to choose a price of $4.00. $800 Price = $4.00 $50 %3D O B. The cooperative equilibrium is for Kellogg and Post to both choose a price of $2.50. Post of $4.00. OC. The cooperative equilibrium is for Kellogg and Post to both choose a price $350 O D. The cooperative equilibrium is for Kellogg to choose a price of $4.00 and $350 Price = $2.50 $50 Post to choose a price of $2.50. O E. A cooperative equilibrium does not exist for this game. Clear all Chec 88,092 2 47
Consider a market with two firms, Hewlett-Packard (HP) and Dell, that sell printers. Both companies must choose whether to charge a high price ($500) or a low price ($350) for their printers. These price strategies with corresponding profits are depicted in the payoff matrix to the right. HP's profits are in red and Dell's are in blue. Suppose HP and Dell are initially at the game's Nash equilibrium. Then, HP and Dell advertise that they will match any lower price of their competitors. For example, if HP charges $350, then Dell will match that price and also charge $350. What effect will matching prices have on profits (relative to the Nash equilibrium without price matching)? (Enter either positive or negative numeric HP's profit will change by $ and Dell's profit will change by responses using integers.) Price = $500 Dell Price $350 HP Price = $500 Price = $350 $80 $100 $80 $15 $15 $50 $100 $50
Intel and AMD are the two dominant producers of microchip processors. The following matrix gives the payoffs (in millions of dollars) of the two firms for different combinations of their pricing strategies. The first number is Intel's payoff and the second AMD's. AMD Intel Low Price High Price Low Price 35, 30 30, 60 High Price 70,25 65,55 O If this game is played sequentially, the Nash equilibrium will not change irrespective of who moves first. If this one-shot game is repeated for 10 times, the Nash equilibrium is for both firms to choose High Price. O In this game, Pareto criterion leads both firms to choose High Price. This game is an example of coordination game.
Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm(Firm A) is large and the other firm (Firm B) is small, as the prisoner’s dilemma box in Table 10.4 shows. Assuming that both firms know the payoffs, what is the likely outcome in this case?
Suppose two firms (A and B) are competing in price. Each firm can charge either High or Low price and the payoffs (profit or loss) from these strategies are presented below: Firm B High 50, -40 10, 10 Low Firm A Low 0,0 High -40, 50 a. Find all pure strategy Nash equilibria b. If this game is played ten times by these two firms, find all pure strategy Nash equilibria c. Suppose this game is played infinitely and these firms agreed to charge high price in order to earn profits of Gh10 each but a firm will charge low price if its rival cheats. Find the a discount rate that will cause a firm to cheat d. Suppose the discount rate is 40% will the collusion strategies constitute a Nash Equilibrium
Consider a market with two firms, Target and Wal-Mart, that sell CDs in their music department. Both stores must choose whether to charge a high price ($30) or a low price (s13) for the new Miley Cyrus CD. These price strategies with corresponding profits are depicted in the payoff matrix to the right. Target's profits are in red and Wal-Mart's are in blue. Target Target's dominant strategy is to pick a price of S Price = $30 Price = $13 $7,000 $2.500 Price = $30 S7,000 $15,000 Wal - Mart $15.000 $5,000 Price = $13 $2,500 $5,000 Wal-Mart's dominant strategy is to pick a price of $ The new equilibrium market wage will be and the new equilibrium market employment level will be higher unchanged lower higher lower unchanged
Consider a market with two firms, Kellogg and Post, that sell breakfast cereais. Both companies must choose whether to charge a high price ($5.00) or a low price ($3.00) for their cereals. These price strategies, with corresponding profits, are depicted in the payoff matrix to the right. Kellogg's profits are in red and Post's are in blue. What is the cooperative equilibrium for this game? Kelogg Price- $5.00 Price $3.00 OA The cooperative equilibrium is for Kelogg to choose a price of $3.00 and Post to choose a price of $5.00. OB. The cooperative equilibrium is for Kellogg and Post to both choose a price of $3.00. OC. The cooperative equilibrium is for Kellogg and Post to both choose a price of $5.00. OD. The cooperative equilibrium is for Kellogg to choose a price of $5.00 and Post to choose a price dk $3.00. OF Acooperative equilibrium does not exist for this game 00 Price= $5.00 1200 S000 $1.000 Post Is the cooperative equilibrium ikely to occur? $1.000 Price $3.00 450 The…