practice%20final%202

practice%20final%202 - Economics 100C Spring 2009 Final...

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1 Economics 100C Spring 2009 Final Exam (Section B00) 1. Consider the following two-player static game: Player 2 X Y Z Player 1 A 3,5 4,6 6,5 B 2,3 3,7 7,8 C 4,3 2,1 9,2 a) Does either player have a dominant strategy? Briefly explain your answer. b) Which pairs of strategies represent Nash equilibria of the static game? c) Draw the game tree associated with the sequential version of the game where player 1 moves first and player 2 follows. Which pairs of strategies represent subgame perfect Nash equilibria of the sequential game? 2. There are only two firms producing fire extinguishers, a good that is homogenous due to government regulations that require fire department approval before fire extinguishers can be sold. The cost of production for firm 1 is given by , and the cost for firm 2 is given by . Inverse demand for fire extinguishers is given by , where is the market price and is the market quantity. a) In attempting to maximize their profits, the two firms form a cartel. What quantity will each firm produce? b) Show mathematically and explain why each firm has an incentive to expand output starting from the cartel quantities. 3. Consider a model of Cournot competition in a market with differentiated products. Two firms compete in this market by choosing quantity, and each firm’s cost function is
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This note was uploaded on 10/21/2010 for the course ECON 1530 taught by Professor Ohly during the Spring '10 term at Dartmouth.

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practice%20final%202 - Economics 100C Spring 2009 Final...

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