ECON 101 Study Guide - Quiz Guide: Nash Equilibrium, Strategic Dominance, Costco

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ECON 101 Full Course Notes

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Table 1 below shows the payoff matrix for wal mart and costco from every combination of pricing strategies for the popular playstation 4. Yes, the dominant strategy is to charge a high price. Yes, the dominant strategy is to charge a low price. Yes, it has a dominant strategy depending on what costco does. Suppose at the start of the game each firm charges a low price and earns a profit of ,000. No, it is not a nash equilibrium because each firm can do better by charging the high price. No, the current situation is not a nash equilibrium; it is a dominant strategy equilibrium. No, the current situation is not a nash equilibrium. The nash equilibrium for each firm is to have the other charge a high price for the firm in question charge a. Yes, the current situation is a nash equilibrium.

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	St. Petersburg Times
	Low Price		High Price
Low Price	$120,000		$54,000
Tampa Tribune		$100,000		$120,000
Tampa Tribune	$90,000		$88,000
High Price		$54,000		$90,000

The Tampa Tribune and the St. Petersburg Times compete for readers in the Tampa Bay market for newspapers. Recently, both newspapers considered changing the prices they charge for their Sunday editions. Suppose they considered the following payoff table for making a simultaneous decision to charge either a low price of $0.50 or a high price of $1.00. Tampa's profits are shown in bold. St. Petersburg's profits are in regular type.
For questions 1 - 7, choose the correct answer to fill in the blanks. Use the suggested words in parentheses after each blank. Provide a short explanation (25-50 words) to defend each choice.

1. Tampa Tribune's dominant strategy is ____________ (low price, high price, it has no dominant strategy).

2. St. Petersburg Times' dominant strategy is ____________ (low price, high price, it has no dominant strategy).

3. Tampa Tribune's dominated strategy is ____________ (low price, high price, it has no dominant strategy).

4. St. Petersburg Times' dominated strategy is ____________ (low price, high price, it has no dominant strategy).

5. This newspaper pricing decision ________ (is, is not) a Prisoners' Dilemma.

6. Is there a Nash Equilibrium in this game? If so, which cell(s) is/are the Nash? Is/are the Nash Dominant Strategy Equilibrium?

7. Which cell(s) is/are strategically stable?

purpleox428

The Tampa Tribune and the St. Petersburg Times compete for readers in the Tampa Bay market for newspapers. Recently, both newspapers considered changing the prices they charge for their Sunday editions. Suppose they considered the following payoff table for making a simultaneous decision to charge either a low price of $0.50 or a high price of $1.00. Tampaâs profits are shown in bold. St. Petersburgâs profits are in regular type.
For questions 1 â 7, choose the correct answer to fill in the blanks. Use the suggested words in parentheses after each blank. Provide a short explanation (25-50 words) to defend each choice.

1. Tampa Tribune's dominant strategy is ____________ (low price, high price, it has no dominant strategy).

2. St. Petersburg Times' dominant strategy is ____________ (low price, high price, it has no dominant strategy).

3. Tampa Tribune's dominated strategy is ____________ (low price, high price, it has no dominant strategy).

4. St. Petersburg Times' dominated strategy is ____________ (low price, high price, it has no dominant strategy).

5. This newspaper pricing decision ________ (is, is not) a Prisoners' Dilemma.

6. Is there a Nash Equilibrium in this game? If so, which cell(s) is/are the Nash? Is/are the Nash Dominant Strategy Equilibrium?

7. Which cell(s) is/are strategically stable?

aquamarinekangaroo764

1) Mitchell Electronics produces a home video game that has become very popular with children. Mitchell's managers have reason to believe that Wright Televideo Company is considering entering the market with a competing product. Mitchell must decide whether to set a high price to accommodate entry or a low price to deter entry. The payoff matrix below shows the profit outcome for each company under the alternative price and entry strategies with the payoffs occurring (Mitchell, Wright).

Wright Televideo
Enter Do Not Enter
High Price 60, 25 85, 0
Mitchell
Electronics Low Price 30, -20 60, 0

a) Does Mitchell have a dominant strategy? Explain.

b) Does Wright have a dominant strategy? Explain.

c) Mitchell's managers have vaguely suggested a willingness to lower price in order to deter entry. Is this threat credible in light of the payoff matrix? Explain.

d) If the threat is not credible, what changes in the payoff matrix would be necessary to make the threat credible? What business strategies could Mitchell use to alter the payoff matrix so that the threat is credible?

browncockroach21

ECON 101 Study Guide - Quiz Guide: Nash Equilibrium, Strategic Dominance, Costco

ECON 101 Full Course Notes

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