ECON 100B Midterm: Econ100B Midterm 2016 Winter Solution
Document Summary
Candidates should answer all questions in the space provided. You may con- tinue on the back of the sheet if you need additional space. This is a closed- book, closed-notes exam, with no calculators. The total number of points for the paper is 40. If so, compute them. (4 marks: suppose player 1 (row player) moves rst. List all subgame perfect equilibria (pure and mixed) and explain your reasoning. (4 marks) (remember to show all working) Consider a bertrand game with di erentiated products in which two rms simulta- neously choose prices. The marginal cost for rm 1 is zero. The marginal cost for rm 2 is 12. There are no xed costs for either rm. Now consider a sequential move bertrand game in which rm 1 chooses its price. Why are both rms" pro ts higher than in the simultaneous move game? (3 marks) (remember to show all working)
