Two firms X and Y compete with each other. Firm X can produce one of three products X1, X2,or X3. Similarly, firm Y can produce one of three products Y1, Y1, and Y3. Each firm's profitdepends on its own and its competitor's decision about which product to produce. These profitsare given in the table below where each cell presents profits corresponding to a pair of chosenstrategies with the first number being the profit of firm X and the second being the profit of firmY. For example, if X chooses to produce X3 and Y chooses to produce Y1, the profit of X willbe $15 and the profit of Y will be $20. The firms make their product choice decisionssimultaneously and independently of each other.Y1Y2Y3X10, 012, 816, 1615, 2018, 920, 15 8, 1218, 18 9, 18X2X311) Does this game have any equilibrium in dominant strategies? If yes, find all of them.12) In addition to the equilibria (if any) you found in the previous question, does this game haveany other equilibria? If yes, find all of them.13) Now, assume that firm X, before making its decision about which product to produce, findsthat one of its employees secretly provides information to Y. In particular, that employee canfind out which product firm X will produce, and firm Y will be able to make its decision basedon this information. Unfortunately, firm X does not know who that employee is and cannotsimply fire everybody. It cannot prevent its employees from knowing which product it willproduce and conveying this information to Y either. Which products will firms X and Y end upproducing?

The payoff matrix for both the firms is given below :- Y1 Y2 Y3 X1 12, 8 18, 9 0, 0 X2 16,…

Answered: lepends on its own and its competitor's…

Business

Economics

lepends on its own and its competitor's decision about which product to produce. These profits

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter15: Oligopoly And Strategic Behavior

Section: Chapter Questions

Problem 14P

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