Limit Pricing Revisited: Consider the limit pricing-entry deterrence game described in Section 16.2 and imagine that second-period profits are dis- counted using a discount factor & ≤ 1. Furthermore consider the strategies in which each type of player 1 chooses its monopoly quantity in the first period IL = so that q = 2 and q 1.5. For which values of 8 will this be part of a separating perfect Bayesian equilibrium?
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- True/False 1. In a principal-agent relationship between owner and manager with hidden e§ort, the owner can design a wage scheme that insures the optimal Örst best e§ort by the manager regardless of the risk aversion of the manager. Justify your answer. 2. Consider a monopoly that faces an inverse demand curve and has a linear cost function. The monopoly would be indi§erent when maximizing proÖts between either choosing quantities or choosing prices. 3. A multiproduct Örm that as monopoly power over several products sets lower prices than separate Örms (each controlling a single product) when the products are substitutes or when there are economies of scope. 4. In the dominant Örm model (‡ la Hotelling) an increase in the marginal cost of the dominant Örm (with constant marginal costs) implies that proÖts necessarily decrease. 5. Suppose that an industry has 10 Örms where the market shares are ordered from the most to the least dominant Örm f0:5; 0:37; 0:05; 0:03; 0:02; 0:01;…Does each individual in a prisoners dilemma benefit more from cooperation or from pursuing self-interest? Explain briefly.There are two firms in the market (duopoly). These two firms are competingsimultaneously. The first firm chooses its output level (x) by predicting the second firm’soutput (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assumethat the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reactionfunction of the first firm. (2) Find the equilibrium (output and profit of each firm) whentwo firms simultaneously compete
- in the sample imit pricing model, the entrant moves first to choose to Enter the market or Stay Out. Once the entrant moves, the incumbent fem choose to Fight or Share, If the entrant choose to stay out, the entrant receives zero profit while the incumbent ears the monopoly prett. Suppose when the incumbent and the entrant Fight, they compete in Bertrand style and when the incumbent Share the market, the firms compete in Cournot style. Complete the following game by fill in the associated payoffs at the end nodes and solve the game using the backward induction (e. find the equilibrium path. Assume both the entrant and incumbent have the same marginal cost of 2 and the inverse demand is P-14-Q Incumbent: Share Enter Fight Entrant Stay Out If Entrant enters and Incumbent shares, the payoff for the Entrant is If Entrant enters and Incumbent fights, the payoff for the Entrant is If the Entrant stays out, the payoff for the Entrant is At equilibrium, Entrant will choose and the payoft for…12. Consider a game where each player picks a number from 0 to 60. The guess that is closest to half ofthe average of the chosen numbers wins a prize. If several peopleare equally close, then they share theprize. The game theory implies that (A) all players have dominant strategies to choose 0 (B) all players have dominant strategies to choose 30 (C) there is a Nash equilibrium where all players pick 0 (D) there is a Nash equilibrium where all players pick positive numbers 13. Behavioral data in such games suggests that (A) most subjects choose 0; (B) most subjects choose 30; (C) common answers include 30, 15, 7.5, and 0; (D) most subjects use randomization. Can you help me answer number 13 please?Problem 3. Consider the following game with three firms. First, firms 1 and 2 si- multancously choose quantities q1 and q2 respectively. After observing firm 1 and 2's quantities, firm 3 chooses its quantity q3. There is no production cost and the inverse demand function is p= 12 – (91 +2 + 93). (a) Compute the SPNE of this game. (b) Give an example of Nash equilibrium s* with s = 4 and s, = 6 , that is not subgame perfect. game theory question
- Discussion Question 13-11 Network effects give Internet firms a boost with respect to first mover advantages. This is because with network effects O whichever firm's network becomes the largest will become the most valuable to potential customers and will therefore attract even more users. O only firms with access to proprietary technology can form a network. O networks can be networked to create even more traffic and profits. O the first internet firm to establish a network has the most influence over any regulation. When network effects are at play, an increase in the number of people using a given product will shift the demand curve to Oright and make it more elastic. O the right and make it more inelastic. O left and make it more inelastic. O left and make it more elastic. NOV 12 tv NA 106. Consider the following two-player game: 2 L M U 3,3 2,3 1 M 2,1 3,1 D R 0,2 3,3 0,3 3,0-5, -5 a. Find all pure NE. b. Find a (non-pure) MNE in which player 1 (the row player) plays a pure strategy. c. (Harder Question) Show that there cannot be a CE prescribing that strat- egy D of player 1 (the column player) is played with positive probability.Enter The payoffs are represented in the game tree illustrated in the figure to the right What is the subgame perfect Nash equilibrium? -(450,125 Rival Small O A. The game does not have a Nash equililbrium. O B. The Nash equilibrium is for the incumbent produce the large quantity and for the rival to only enter if the (900,0) Don't enter incumbent produces the small quantity. Incumbent Enter OC. The Nash equilibrium is for the incumbent to produce the large quantity and for the rival to not enter regardless of the incumbent's quantity. (400, -2 Large Rival O D. The Nash equilibrium is for the incumbent produce the small quantity and for the rival to only enter if the incumbent produces the small quantity. (800,0) Don't enter O E. The Nash equilibrium is for the incumbent to produce the large quantity and for the rival to enter regardless of the incumbent's quantity.
- In game theory, a dominant strategy is the best strategy to pick, no matter which moves are chosen by the other player. O to make the exact same move that was made by the other player. the choice that causes the payoff for the other player to be minimized, regardless of the payoff it earns the best strategy to pick, assuming the other player makes his or her best possible choice. to allocate all personnel resources towards defensive talent in order to dominate opposing offenses. 46°FSuppose both a monopolist and a perfectly competitive firm are producing in theirrespective markets at a point where marginal cost is $8 and marginal revenue is $10. Whatshould the profit-maximizing firms do? Group of answer choices Both the monopolist and the perfectly competitive firm should increase output until MC= MR. The monopolist should keep producing at this level but the perfectly competitive firmshould decrease output until MC = MR. The monopolist should increase output but the perfectly competitive firm should shutdown. Both the monopolist and the perfectly competitive firm should decrease output until MC= MR.1) What are the Nash equilibria? Which one is unreasonable/non-credible threat? 2) What are the subgame perfect Nash equilibria? Does SPNE concept eliminate the unreasonable Nash equilibrium?