problemset3

problemset3 - EC332, Fall 2009, Prof. Jordi Jaumandreu...

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EC332, Fall 2009, Prof. Jordi Jaumandreu Problem set #3 Oligopoly Competition 1. (Cabral) Consider the following game depicting the process of standard setting in high de f nition television (HDTV). The U.S. and Japan must simul- taneously decide whether to invest a high or a low value into HDTV research. Each country payo f sare Japan Low High U.S. Low 4,3 2,4 High 3,2 1,1 a. Are there any dominant strategies in this game? What are the rationality assumptions implicit in this equilibrium? b. Suppose now that the U.S. has the option to committing to a strategy before Japan’s decision is reached. How would you model this new situation? What are the Nash equilibria of this new game? c. Comparing the answers to and  what can you say about the value of commitment for the U.S.? 2. Two f rms compite in prices in a homogeneous market with demand ( ) Both f rms have equal constant marginal cost  Show the Bertrand equilibrium. Now suppose that one of the
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This note was uploaded on 11/09/2010 for the course CAS ec399 taught by Professor Tack during the Spring '10 term at BCUC.

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problemset3 - EC332, Fall 2009, Prof. Jordi Jaumandreu...

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