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Unformatted text preview: ECOS2201 - Economics of Competition and Strategy Workshop - 6 1. Two ﬁrms each have two strategies, high and low output. The payoﬀs are given in the matrix below. First payoﬀ belongs to ﬁrm Row. Firm Column Low High 4, 4 1, 6 6, 1 2, 2 Firm Row Low High i. provide a rationale for these payoﬀs. ii. ﬁnd the nash equilibrium of this game iii. if this game is played three times will cooperation result iv. If this game is repeated an inﬁnite number of times, what must the interest rate be for cooperation to arise under the grim strategy? 2. Explain why cooperation is not an equilibrium outcome in a ﬁnitely repeated Cournot game, but it can be in an inﬁnitely repeated Cournot game. 3. Let individual A have demand curve pA = 100 − qA and individual B have demand curve pB = 100 − 2qB . The monopolist’s marginal cost is constant and equal to c = 20. The monopolist price discriminates. (i) Find the proﬁt maximising per-unit price for each individual (ii) verify the elasticity formula given in class 4. Let individual A have demand curve pA = 100 − qA and individual B have demand 2 curve pB = 50 − qB . The monopolist’s cost function is C (Q) = Q with marginal 4 cost C (Q) = Q . The monopolist price discriminates. 2 (i) Find the proﬁt maximising per-unit price for each individual (ii) verify the elasticity formula given in class 1 ...
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This note was uploaded on 02/16/2010 for the course ECOS Economics taught by Professor None during the One '09 term at University of Sydney.
- One '09