"Simultaneous Games - Continued

"Simultaneous Games - Continued - Simultaneous Games...

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Simultaneous Games – Continued Royal Caribbean (RC) and Carnival (C) operate the only two three day Caribbean cruises from Miami. If they act independently to maximize profits, each will charge $300 per person going on the cruise. In this case, RC earns $175,000 and C earns $185,000. If, however, the firms act jointly to maximize (monopoly) profits for the industry and each charges $450 per person, RC earns $350,000 and C earns $275,000. If RC maintains the $450 price while C discounts, and charges $300, RC’s profits fall to $50,000 while C earns $375,000. If C maintains the $450 price and RC discounts, charging $300, C earns $60,000 and RC earns $320,000. Bookings for cruises are done through an electronic clearinghouse sponsored by the industry. Managers for both firms must announce their prices to this clearinghouse without knowledge of the other firm’s decision. 1. What is the normal form of this game? 2.
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This note was uploaded on 04/12/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue University-West Lafayette.

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"Simultaneous Games - Continued - Simultaneous Games...

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