Republic Services (RS) Submit high bid Submit low bid RS: $1.7 billion RS: $2.1 billion WM:...

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Republic Services (RS) Submit high bid Submit low bid RS: $1.7 billion RS: $2.1 billion WM: $2.5 billion WM: $1.2 billion Submit low bid RS: $0.3 billion RS: $0.4 billion WM: $3.7 billion WM: $1.7 billion The market for landfills is essentially a duopoly: Waste Management owns the largest number of landfills, and Republic Services owns the second largest number. When municipalities put their trash-collecting contracts out to bid, Waste Management and Republic Services can submit either high bids or low bids. The adjacent payoff matrix shows how each company's hypothetical economic profit depends on its own bid and its competitor's bid. It is, of course, illegal for the two companies to enter into a price-fixing cartel to submit high bids, so rule out that possibility. If the companies bid on only one contract, what is the Nash equilibrium? What do the firms' managers think of this equilibrium? A. Both firms will submit a high bid in the Nash equilibrium outcome. The firms' managers will be happy with this outcome, as they cannot increase their profits by choosing other outcomes. OB. Both firms will submit a high bid in the Nash equilibrium outcome. The firms' managers will be unhappy with this outcome, as they could increase their profits by simultaneously choosing another outcome. C. Both firms will submit a low bid in the Nash equilibrium outcome. The firms' managers will be happy with this outcome, as they cannot increase their profits by choosing other outcomes. D. Both firms will submit a low bid in the Nash equilibrium outcome. The firms' managers will be unhappy with this outcome, as they could increase their profits by simultaneously choosing another outcome. - Waste Management (WM)| Submit high bid What is the cooperative equilibrium? If the companies bid repeatedly on different contracts, what can the managers do to reach the cooperative equilibrium? A. Both firms choosing a low bid is the cooperative equilibrium. If the companies repeat this game, they can use a tit-for-tat strategy to reach the cooperative equilibrium. B. Both firms choosing a high bid is the cooperative equilibrium. If the companies repeat this game, they can use a tit-for-tat strategy to reach the cooperative equilibrium. C. Both firms choosing a high bid is the cooperative equilibrium. If the companies repeat this game, they can use a grim trigger strategy to reach the cooperative equilibrium. D. Both firms choosing a low bid is the cooperative equilibrium. If the companies repeat this game, they can use a grim trigger strategy to reach the cooperative equilibrium. Republic Services (RS) Submit high bid Submit low bid RS: $1.7 billion RS: $2.1 billion WM: $2.5 billion WM: $1.2 billion Submit low bid RS: $0.3 billion RS: $0.4 billion WM: $3.7 billion WM: $1.7 billion The market for landfills is essentially a duopoly: Waste Management owns the largest number of landfills, and Republic Services owns the second largest number. When municipalities put their trash-collecting contracts out to bid, Waste Management and Republic Services can submit either high bids or low bids. The adjacent payoff matrix shows how each company's hypothetical economic profit depends on its own bid and its competitor's bid. It is, of course, illegal for the two companies to enter into a price-fixing cartel to submit high bids, so rule out that possibility. If the companies bid on only one contract, what is the Nash equilibrium? What do the firms' managers think of this equilibrium? A. Both firms will submit a high bid in the Nash equilibrium outcome. The firms' managers will be happy with this outcome, as they cannot increase their profits by choosing other outcomes. OB. Both firms will submit a high bid in the Nash equilibrium outcome. The firms' managers will be unhappy with this outcome, as they could increase their profits by simultaneously choosing another outcome. C. Both firms will submit a low bid in the Nash equilibrium outcome. The firms' managers will be happy with this outcome, as they cannot increase their profits by choosing other outcomes. D. Both firms will submit a low bid in the Nash equilibrium outcome. The firms' managers will be unhappy with this outcome, as they could increase their profits by simultaneously choosing another outcome. - Waste Management (WM)| Submit high bid What is the cooperative equilibrium? If the companies bid repeatedly on different contracts, what can the managers do to reach the cooperative equilibrium? A. Both firms choosing a low bid is the cooperative equilibrium. If the companies repeat this game, they can use a tit-for-tat strategy to reach the cooperative equilibrium. B. Both firms choosing a high bid is the cooperative equilibrium. If the companies repeat this game, they can use a tit-for-tat strategy to reach the cooperative equilibrium. C. Both firms choosing a high bid is the cooperative equilibrium. If the companies repeat this game, they can use a grim trigger strategy to reach the cooperative equilibrium. D. Both firms choosing a low bid is the cooperative equilibrium. If the companies repeat this game, they can use a grim trigger strategy to reach the cooperative equilibrium.

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