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The level of noise at a party often gets so loud that you have to shout to make yourself heard. Surely everyone would be better off if everyone kept their voice down. Explain this behavior in terms of dominant strategies.

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

Using the guess and verify method, you can clearly conclude that an outcome is consistent with the concept of Nash equilibrium only if: (Explain Reasoning)

A.You find that both players are better off in that outcome than in any other possible outcome of the game

B.You find that no player has an incentive to deviate from that outcome

C.You find that at least one player has no incentive to deviate from that outcome

D.You find that outcome to be the result of both players playing their dominant strategies

Your software company has just completed the first version of SpokenWord, a voice-activated word processor. As a marketing manager, you have to decide on the pricing of the new software. You commissioned a study to determine the potential demand for SpokenWord. From this study, you know that there are essentially two market segments of equal size, professionals, and students (one million each). Professionals would be willing to pay up to $400 and students up to $100 for the full version of the software. A substantially scaled-down version of the software would be worth $50 to consumers and worthless to professionals. It is equally costly to sell any version. In fact, other than the initial development costs, production costs are zero. Although you know there are two market segments, you cannot directly identify a consumer as belonging to a specific market segment.
 
(a) What are the optimal prices for each version of the software?
 
(b) Suppose that, instead of the scaled-down version, the firm sells an intermediate version that is valued at $200 by professionals and $75 by students. Is the firm better off by selling the intermediate version instead of the scaled-down version?

 

Consider each of the following examples of price discrimination. For each case, explain how price discrimination works. Also, explain which consumers would be worse off and which consumers would be better off if the firm were unable to price discriminate in this way.

1. Seniors pay lower prices for theatre tickets than do other adults.

2. Consumers pay less for paperback books than for hardcover books, but must wait six to twelve months before the paperbacks are made available.

3. Customers at garage sales often pay a lower price if they ask for one that is if they reveal that they are prepared to haggle.

4. Airline customers get a discount fare if they are prepared to stay over a Saturday night at their destination

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