20-Discussion Questions

20-Discussion Questions - Lecture 20: Game Theory (I)...

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Lecture 20: Game Theory (I) Suggested questions and exercises (Pindyck and Rubinfeld, Ch.13). Exercises: 4, 5, 6, 7 EXERCISES 4. Two firms are in the chocolate market. Each can choose to go for the high end of the market (high quality) or the low end (low quality). Resulting profits are given by the following payoff matrix: Firm 2 Low High Low -20, -30 900, 600 Firm 1 High 100, 800 50, 50 a. What outcomes, if any, are Nash equilibria? b. What is the cooperative outcome? c. Which firm benefits most from the cooperative outcome? How much would that firm need to offer the other to persuade it to collude? 5. Two major networks are competing for viewer ratings in the 8:00-9:00 P.M. and 9:00-10:00 P.M. slots on a given weeknight. Each has two shows to fill this time period and is juggling its lineup. Each can choose to put its “bigger” show first or to place it second in the 9:00-10:00 P.M. slot. The combination of decisions leads to the following “ratings points” results: Network 2
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20-Discussion Questions - Lecture 20: Game Theory (I)...

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