ECON 111 Lecture Notes - Lecture 11: Strategic Dominance, Oligopoly, Simultaneous Game

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ECON 111 Full Course Notes

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Oligopoly examples: players: two firms in the industry: abc and xyz. Strategies: two price strategies for each firm (i) high price (ii) low prices. Best outcome for both players: high price, high price: refer to the above payoff matrix. Suppose that speedy bike and power bike are the only two bicycle manufacturing firms serving the market. Both can choose large or small advertising budgets. What will be the total small and small with 25 + 25 = 50 payoff for the two firms: refer to the above payoff matrix. Bob"s burgers and sam"s sandwiches are competing restaurants in a small town. Both are considering adding pizza to their line of products: does any firm have a dominant strategy? (circle one) yes. _________: what will be the final outcome we would expect to occur? two nash equilibrium pizza-no pizza or no pizza - pizza, prisoners" dilemma. Leo and david were caught while trespassing a bank area.

Related Questions

Consider two firms choosing prices in a strategic setting. The matrix below represents their payoffs (in Millions of $) in various pricing scenarios:

		Firm B
		Low Price	High Price
Firm A	Low Price	5,5	10,-20
Firm A	High Price	-20,20	15,15

Do either of the firms have a dominant strategy? If so, what is it?

What is the Nash Equilibrium of this game?

Is the equilibrium of this game efficient? If not, explain why the efficient outcome is not an equilibrium.

Two firms operating under oligopoly are faced with two choices, to charge a high price or a low price. If one firm charges a low price while the other a high price, the firm that charges a low price attracts customers and earns a profit of K600,000 while the firm charging a high price loses customers and earns only K100,000. If both firms charge a high price they earn K400,000 each while both charge a low price, they earn K200,000 each. What profits are the firms likely to earn in the absence of cooperation?

champagnetermite774

Suppose there are only two firms in the industry X, Firm 1 (F1) and Firm 2 (F2), and they can collude to behave like a monopoly (charge a high-price and split the market equally). Another possible outcome is for these firms to charge a low-price and compete with each other for customers. The payoff matrix below states the profits for each firm following different pricing strategies. (a) Would collusion be a stable solution? (b) Is your answer in part (a) good or bad to the firms and consumers. Firm 1 Strategy High-Price Low-Price Low-Price (F1 = $14,F2 = $14) (F1 = $17, F2 = $12) Firm 2 (F1 = $12, F2 = $17) (F1 = $15,F2 = $15) High-Price

ECON 111 Lecture Notes - Lecture 11: Strategic Dominance, Oligopoly, Simultaneous Game

ECON 111 Full Course Notes

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