Practice+Final+1_Solution

Charlieenterswithlowermarginalcostsatpointethananniean

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Unformatted text preview: n
to
him?
Why
or
why
not?
 (Justify
your
answer
using
a
game
tree
and
appropriate
analysis.)
 
 
 
 
 
 6
 
 
 Firms
and
Markets

 Spring
2010
 Final
Exam
 
 
 
 
 
 
 
 The
COO
is
not
completely
correct.
Dime
should
move
first.
But
he
should
 produce
80
tons.
If
Dime
moves
first
and
plays
80,
this
will
make
Quarter
play
50.
 So
Dime
will
get
150
and
Quarter
gets
75.
This
is
the
better
for
Dime
than
playing
 either
of
the
two
equilibria
in
the
simultaneous
move
game.
 
 [2
points]
Drawing
tree
and
payoffs
correctly.
 [2
points]
Solving
last
stage
of
the
game
correctly.
(Judged
based
on
their
own
 numbers)
 [2
points]
Solving
first
stage
of
the
game
correctly.
(Again
based
on
payoffs
they
 have)
 
[2
points]
For
conclusion.
(Give
points
if
conclusion
is
correct
given
own
 numbers)
 
 Sat
sections
gets
one
bonus
point
if
they
correctly
write
out
SPNE:

 (80,
(70,60,50))
OR
 “Quarter
plays
80;
Dime
plays
70
if
Q
plays
50,
D
plays
60
if
Q
plays
60,
 and
D
plays
50
if
Q
plays
80)”
 (No
penalty
for
not
mentioning.)
 
 
 7
 
 
 Firms
and
Markets

 Spring
2010
 Final
Exam
 
 
 
 
 
QUESTION
2.
Market
for
Ready
Mix
Concrete
[30
points]



 
 Since
wet
concrete
cannot
travel
more
than
an
hour
before
hardening,
the
ready
mix
 concrete
industry
in
any
particular
market
is
only
produced
and
served
by
local
firms.

It
 is
used
in
construction
of
roads
and
buildings,
and
is
essentially
identical
across
different
 producers.
Below
is
a
chart...
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This document was uploaded on 03/09/2014 for the course BUS 01 at NYU.

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