Suppose the only two hospitals in a local market are each considering: purchasing more X-ray equipment,...

 

  
 

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Suppose the only two hospitals in a local market are each considering: purchasing more X-ray equipment, building a new wing to increase bed (and patient) capacity, or foregoing any kind of expansion (i.e. Do Nothing). Currently, each hospital earns the same annual profit, $14.5 million ($14.5M). The matrix below shows potential future annual profits of the hospitals, depending on the action (i.e. strategy) each hospital chooses. Use the matrix to answer the questions (a. through d.) below. Assume, initially (questions a. through c.), the hospitals make their decisions simultaneously. In the last question (d.), the hospitals make their decisions sequentially (see details below). 7 18 19 20 21 22 23 30 31 32 33 34 35 Hospital 1 24 25 26 27 a. In the boxes below, enter any dominated strategies for each hospital. (2 pts.) 28 NOTE: Put "none" if a hospital does not have a dominated strategy. 29 Hospital 1 Hospital 2 Do Nothing More X-ray Equip. Build New Wing Do Nothing H1: $14.5M H2: $14.5M H1: $17.2M H2: $12.1M H1: $16.0M H2: $10.8M Hospital 2 More X-ray Equip. H1: $12.1M H2: $17.2M H1: $13.4M H2: $13.4M H1: $9.6M H2: $10.2M Build New Wing H1: $10.8M H2: $16.0M H1: $10.2M H2: $9.6M H1: $7.8M H2: $7.8M a. In the boxes below, enter any dominated strategies for each hospital. (2 pts.) NOTE: Put "none" if a hospital does not have a dominated strategy. Hospital 1 6 7 8 b. In the boxes below, enter any dominant strategies for each hospital. (2 pts.) 9 NOTE: Put "none" if a hospital does not have a dominant strategy. 0 Hospital 1 1 2 Hospital 2 -3 4 Hospital 2 15 16 47 48 49 c. What is the Nash equilibrium? (2 pts.) 50 51 52 53 54 55 56 57 c. What is the Nash equilibrium? (2 pts.) 3 Now, suppose Hospital 1 were able to make its decision before Hospital 2, so that Hospital 2 made its decision after observing what Hospital 1 di 3 d. Under these conditions, what would be the Nash equilibrium? (2 pts.) 1 2 3 4 5 679 56 68 Suppose the only two hospitals in a local market are each considering: purchasing more X-ray equipment, building a new wing to increase bed (and patient) capacity, or foregoing any kind of expansion (i.e. Do Nothing). Currently, each hospital earns the same annual profit, $14.5 million ($14.5M). The matrix below shows potential future annual profits of the hospitals, depending on the action (i.e. strategy) each hospital chooses. Use the matrix to answer the questions (a. through d.) below. Assume, initially (questions a. through c.), the hospitals make their decisions simultaneously. In the last question (d.), the hospitals make their decisions sequentially (see details below). 7 18 19 20 21 22 23 30 31 32 33 34 35 Hospital 1 24 25 26 27 a. In the boxes below, enter any dominated strategies for each hospital. (2 pts.) 28 NOTE: Put "none" if a hospital does not have a dominated strategy. 29 Hospital 1 Hospital 2 Do Nothing More X-ray Equip. Build New Wing Do Nothing H1: $14.5M H2: $14.5M H1: $17.2M H2: $12.1M H1: $16.0M H2: $10.8M Hospital 2 More X-ray Equip. H1: $12.1M H2: $17.2M H1: $13.4M H2: $13.4M H1: $9.6M H2: $10.2M Build New Wing H1: $10.8M H2: $16.0M H1: $10.2M H2: $9.6M H1: $7.8M H2: $7.8M a. In the boxes below, enter any dominated strategies for each hospital. (2 pts.) NOTE: Put "none" if a hospital does not have a dominated strategy. Hospital 1 6 7 8 b. In the boxes below, enter any dominant strategies for each hospital. (2 pts.) 9 NOTE: Put "none" if a hospital does not have a dominant strategy. 0 Hospital 1 1 2 Hospital 2 -3 4 Hospital 2 15 16 47 48 49 c. What is the Nash equilibrium? (2 pts.) 50 51 52 53 54 55 56 57 c. What is the Nash equilibrium? (2 pts.) 3 Now, suppose Hospital 1 were able to make its decision before Hospital 2, so that Hospital 2 made its decision after observing what Hospital 1 di 3 d. Under these conditions, what would be the Nash equilibrium? (2 pts.) 1 2 3 4 5 679 56 68

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Step 11 a Dominant strategy of hospital A is When H1 does nothing H2 will h... View the full answer