Econ 100A - Worksheet #16 Game Theory I - Static Oligopoly Exercise 1 Two TV networks must decide between airing a football game (action F ) or a movie (action M ) on Saturday night. 70% of the audience wants to watch football, 30% want to watch a movie, and all will not watch TV on Saturday night if their preferred program is not aired. The networks want to maximize their share of the audience. If they air the same program, they split the audience evenly. 1) Model the problem as a simultaneous game and show that there is a dominante strategy equilibrium. Is this equilibrium socially optimal? Is this a prisoner’s dilemma-type problem? 2) In order to promote the movie industry, the governement decides to impose a tax t on networks airing footbal. We assume that this tax can be expressed as a market share, so that if the market share is m without the tax it is m-t after the tax. a) Show that ( M,F ) and ( F,M ) are Nash equilibria of the game if and only if 5 6 t 6 55 . b)
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This note was uploaded on 07/09/2010 for the course ECON 100A taught by Professor Woroch during the Fall '08 term at Berkeley.