GoJex and Grav are both considering whether to charge a low price or a high price to their customers. If both firms charge a low price, each firm will make a profit of $5 million. If GoJex charges a low price while Grav charges a high price, GoJex will make a profit of $25 million and Grav will only make a profit of $2 million. On the other hand, if GoJex do not charges a low price while Grav does, GoJex will make a profit of $2 million while Grav will make a profit of $25 million. Finally, if both firms charge a high price, each firm will make a profit of $15 million. a. Use the information above to construct a payoff matrix for GoJex and Grav and What is the dominant strategy for each firm? Explain. b. Based on your answer (point b) above, what is the Nash equilibrium for this game? Explain. c. What is the cooperative (collusion) outcome? Explain
GoJex and Grav are both considering whether to charge a low price or a high price to their customers. If both firms charge a low price, each firm will make a profit of $5 million. If GoJex charges a low price while Grav charges a high price, GoJex will make a profit of $25 million and Grav will only make a profit of $2 million. On the other hand, if GoJex do not charges a low price while Grav does, GoJex will make a profit of $2 million while Grav will make a profit of $25 million. Finally, if both firms charge a high price, each firm will make a profit of $15 million. a. Use the information above to construct a payoff matrix for GoJex and Grav and What is the dominant strategy for each firm? Explain. b. Based on your answer (point b) above, what is the Nash equilibrium for this game? Explain. c. What is the cooperative (collusion) outcome? Explain
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter10: Monopolistic Competition And Oligopoly
Section: Chapter Questions
Problem 4SCQ: Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly...
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