PS_CH13 - ECON2296-PracticeQuestionsChapter13 1. The...

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ECON 2296  -  Practice Questions Chapter 13 1. The following game involves two firms. Firm 1 can choose strategy A or B. Firm 2 can choose strategy C or D. The outcomes show each firm's profit. Firm 2 C D Firm 1 A 1: $100 m 1: $400 m 2: $500 m 2: $200 m B 1: $300 m 1: $200 m 2: $100 m 2: $400 m a) Is there a dominant strategy for each firm? If so, what is it? b) Is there a Nash equilibrium? If so, what is it? c) What would firm 1 choose if it used the maximin strategy? d) Why would a firm use the maximin strategy? Explain. 2. The following game involves two firms. Firm 1 can choose strategy A or B. Firm 2 can choose strategy C or D. The outcomes show each firm's profit. Firm 2 C D Firm 1 A 1: $500 m 1: $100 m 2: $300 m 2: $200 m B 1: $200 m 1: $300 m 2: $100 m 2: $400 m a) Is there a dominant strategy for each firm? If so, what is it? b) Is there a Nash equilibrium? If so, what is it? c) Is there any advantage for either firm to be a first mover? d) What classic game is represented by this game? e) What real-life situation in oligopolistic markets could be described by this game? 3. The following game involves two firms. Firm 1 can choose strategy A or B. Firm 2 can choose strategy C or D. The outcomes show each firm's profit. Firm 2 C D
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Firm 1 A 1: $400 m 1: $100 m 2: $300 m 2: $500 m B 1: $700 m 1: $300 m 2: $100 m 2: $200 m a) Is there a dominant strategy equilibrium? If so, what is it? b) Suppose the game is played once, what outcome is most likely? c) Is there an outcome that is superior to that in b? d) What classic game is represented by this game? e) What real-life situations in oligopolistic markets could be described by this game f) Suppose the game is played repeatedly. Would the most likely outcome be the same as in b? 4. The following game involves two firms. Firm 1 can choose strategy A or B. Firm 2 can choose strategy C or D. The outcomes show each firm's profit. Firm 2
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PS_CH13 - ECON2296-PracticeQuestionsChapter13 1. The...

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