HW #2 - Homework#2 Due February 20 1 The Ulysses...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Homework #2. Due February 20. 1. The Ulysses Corporation and the Xenophon Corporation are the only producers of a very sophisticated digital camera. They can each engage in either a high or low level of advertising in trade journals. Xenophon projects that if they do a high level of advertising then they will earn about $11 million if Ullyses also does a high level of advertising, but they will earn $12 million if Ullyses does low-level advertising. On the other hand, Xenophon expects to earn about $13 million if they do low level advertising and so does Ullyses, but they think that if they do low-level advertising and Ullyses does high level advertising then they will earn $12 million. Ullyses projects that if they do high advertising then they will earn $13 million if Xenophon does low advertising, and they will earn $12 million if Xenophon does high advertising. On the other hand, Ullyses expects to earn $11 million if they do low advertising and Xenophon does high advertising, and $12 million if Xenophon also does low advertising. a. Should Ullyses engage in high or low advertising? b. Should Xenophon engage in high or low advertising? c. Does either firm have a dominant strategy? A dominated strategy? Explain. d. Is there a Nash equilibrium outcome? Explain. 2. Two firms, DR and TS, make identical goods and sell them in the same market. The demand in the market each year is Q = 1200 - P. Once a firm has built capacity, it can produce up to its capacity each period with a marginal cost of MC = 0. Building a unit of capacity costs 2400 (for either DR or TS). A unit of capacity lasts four years and has no salvage value. The interest rate is zero. Once production occurs each period, the price in the market adjusts to the level at which all production is sold. (In other words, these firms engage in quantity competition, not price competition).
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern