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Homework5 - Table 1 Separating the Market McGraw Hall...

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Table 1: Separating the Market McGraw Hall Microeconomics Macroeconomics Prentice Hill Microeconomics 5,5 10,10 Macroeconomics 10,10 5,5 Table 2: Pursuing Macro Market McGraw Hall Microeconomics Macroeconomics Prentice Hill Microeconomics 10,10 5,15 Macroeconomics 15,5 8,8 Homework #5 Due Date: Friday, April 29th Note: Only one randomly selected question will be graded. Question 1 There are two textbook publishers, Prentice Hill and McGraw Hall. They can make only one kind of textbook among Microeconomics or Macroeconomics. They should make a decision without knowing the opponent’s decision. Consider the Table 1. The first figure is a payoff for Prentice Hill and the second figure is for McGraw Hall in each cell. (a) List the strategies of Prentice Hill. (b) What is the best response of McGraw Hall when Prentice Hill chooses Microe- conomics? (c) Find all possible Nash equilibrium. A Nash equilibrium is written like (Prentice Hill’s strategy, McGraw Hall’s strategy). Now, Macroeconomics becomes very popular, but it needs a pre-requisite Mi- croeconomics class. That is, if a publisher makes Microeconomics textbook, then
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