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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If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
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at the Because this market is a monopolistically competitive market, you can tell that it is in long-run equihbrium by the fact that the efficient scale. optimal quantity for each firm. Furthermore, the quantity the firm produces n long-run equilibrium is True or False: This indicates that there is a markup on marginal cost in the market for jackets. OTrue False
Kate and Alice are small-town ready-mix concrete duopolints. The market demand tunction is o- 20,000 - 200Pwhere Pis the price of a cubic yard of concrete and Ois the number of cubic yards demanded per year. Marginal cost is sa0 per cubic yard. Suppose Kate onters the market first and chooses her output belore Alice. What is the difference in Alice's profit when Kata enters the market tirst, compared to when they simultanecusly select ther outputa? When Kate entors the markat first, Alice's profit is $3,888.a0 lower. O When Kate enters the market fest, Alice's profit is 513,333.33 lower. O When Kate enters the market first, Alice's profit is $5,000 lower. O When Kate onters the market first, Alice's proft is $1.111.11 higher,
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er to the information provided in Figure 15.2 below to answer the questions that follo Demand and cost conditions for We Do Hair MC ATC 32 28 24 20 MR 40 46 50 60 Number of perms b. 1) Refer to Figure 15.2. The profit-maximizing number of perms for We Do Hair, a monopolistically competitive firm, is 2) Refer to Figure 15.2. At We Do Hair, a monopolistically competitive firm, the profit- maximizing price for a perm is 3) Refer to Figure 15.2. If We 1Do Hair is maximizing profit as a monopolistically competitive firm, it is earning a profit of 4) Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total revenue equals 5) Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically competitive firm, its total costs are 6) Refer to Figure 15.2. From society's point of view, the efficient level of output is 7) Refer to Figure 15.2. In this monopolistically competitive industry, in the long run, Acessibility: Investigate D…
Suppose Clomper's is a monopolst that manuractures and sels stampen, an extremely trendy shoe brand with na close substutes. The followng graph shows the market demand and marginal revenue ( MR ) ourves Clomper's taces, as wall as ins marginal cost ( MC ) , which is constant at $ 3 0 per pair of Stompers. For simplicty, assume that hxed costs are equal to zero; this, combined wah the fact that Clampers marginal cost is constant, means that its marginal cost curve is also equal to the average total cost ( ATC ) ourve. Trs , suppose that Compers camnct price discriminate. That is , it must darpe each consumer the same price for Stompers regardess of the consumer's wilingness and ability to pay. symod ) to shade une pronc, une green pants ( crange symbol ) to shade che consumer surpus, and the black points ( pius symood ) to shade the Suppope now that Clomper's is able to pertecty prico discriminate - that is , it knows cach corsumer's willingness to pay for a pair ar…
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OA OB OC Alpha's Price Policy OD. High Low A с Beta's Price Policy High Low $20 $30 $20 $10 B D $10 The diagram above shows potential outcomes for two oligopolistic competitors. Beta's profits are shown in the upper right corner of each box and Alpha's profits in the lower left corner. If Alpha and Beta engage in collusion (and do not cheat), where will they end up? $15 $30 $15
Suppose that a firm produces wool jackets in a monopolistically competitive market. The following graph shows its demand curve, marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. Place a black point (plus symbol) on the graph to indicate the long-run monopolistically competitive equilibrium price and quantity for this firm. Next, place a grey point (star symbol) to indicate the minimum average total cost the firm faces and the quantity associated with that cost. (?) PRICE (Dollars perjacket) 100 90 80 70 60 50 40 30 20 10 0 0 MC 10 ATC MR 20 30 40 50 80 70 QUANTITY (Thousands of jackets) 80 Demand 90 100 O F ++ Mon Comp Outcome Min Unit Cost hp e