Continue to consider the market described in the previous problem, however make the following change. Suppose...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Continue to consider the market described in the previous problem, however make the following change. Suppose the same industry exists for an infinite number of periods, the discount factor for profits is still ß = 0.9. Firms are considering the following strategy: • As long as no firm has cheated, play according to the agreement to optimize joint profits and split the proceeds. • If either firm has cheated in any earlier period, play the static Nash equilibrium in every period from now on. 1. If both firms follow the proposed strategy, what is the present discounted value of each firm's profits? 2. If one firm decides it will cheat on the agreement and violate the strategy, what is the highest profit that firm can achieve? 3. Based on your previous answers in this question, is the proposed strategy an equilibrium? Why or why not? 4. What is the lowest discount factor, ß that the firms could have for the proposed strategy to be an equilibrium? Continue to consider the market described in the previous problem, however make the following change. Suppose the same industry exists for an infinite number of periods, the discount factor for profits is still ß = 0.9. Firms are considering the following strategy: • As long as no firm has cheated, play according to the agreement to optimize joint profits and split the proceeds. • If either firm has cheated in any earlier period, play the static Nash equilibrium in every period from now on. 1. If both firms follow the proposed strategy, what is the present discounted value of each firm's profits? 2. If one firm decides it will cheat on the agreement and violate the strategy, what is the highest profit that firm can achieve? 3. Based on your previous answers in this question, is the proposed strategy an equilibrium? Why or why not? 4. What is the lowest discount factor, ß that the firms could have for the proposed strategy to be an equilibrium?
Expert Answer:
Answer rating: 100% (QA)
1 If both firms follow the proposed strategy what is the present discounted value of each firms profits The present discounted value of each firms pro... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
Students also viewed these economics questions
-
To become familiar with the use of timers in computer applications. Specifically, to implement a piano like keyboard program using the ATmega2560 timerl in Normal mode and an external speaker....
-
To help you become familiar with the accounting standards, this case is designed to take you to the FASBs Web site and have you access various publications. Access the FASBs Web site at www.fasb.org....
-
To help you become familiar with the accounting standards, this case is designed to take you to the FASBs Web site and have you access various publications. Access the FASBs Web site at www.fasb.org....
-
Zebra Corporation has always been an S corporation and is 100% owned by Paul. Paul has a basis of $40,000 in his Zebra stock at the beginning of the year. During the year, Zebra has an ordinary loss...
-
If your school adopts a new ERP-like system to improve class scheduling, procurement, and HR functions, which of the implementation people challenges in Figure 6-16 might be particularly hard in a...
-
a. Using the characteristics of Fig. 3.24, determine ac at IC = 14 mA and VCE = 3 V. b. Determine dc at Ic = IC mA and VCE = 8 V. c. Determine ac at IC = 14 mA and VCE = 3 V. d. Determine dc at lC =...
-
Demonstrate how EVA calculations are made.
-
Arizona Corp. acquired the business Data Systems for $320,000 cash and assumed all liabilities at the date of purchase. Datas books showed tangible assets of $260,000, liabilities of $40,000, and...
-
Fizer Pharmaceutical paid $85 million on January 2, 2024, for 4 million shares of Carne Cosmetics common stock. The investment represents a 30% interest in the net assets of Carne and gave Fizer the...
-
Jennifer's condo is worth $400,000. She owes $300,000 on her 6% fixed-rate mortgage compounds semiannually that have three years remaining in their term. Jennifer pays $2,245 per month towards it....
-
Periodic inventory using FIFO, LIFO, and weighted average cost methods The units of an item available for sale during the year were as follows: Jan. 1 Aug. 13 Inventory Purchase 10 units at $46 $460...
-
Assignment2122_v1.docx - Word Arial 16 A A Aa A A IEEE A B I U ab F x x A A A D LAW Cheuk Yin (210165298) AaBbCc AaBbCcD AaBbCcl AaBbCc AaBb( AaBb AaBbC AaBbc AaBbCc AaBbCcl...
-
Invest cash in different installments over seven years. Renovation costs in current dollars$14,500,000 Renovation cost inflation rate3.5% Year Cash Flows 0 $15,000,000 1 $ 5,000,000 2 $ 5,000,000 3 $...
-
Ch. 21 - Final Exam > Pg. 4- Course Final Exam 8.8 GET $25 X F Richard and Katherine are man and wife. They own a house in tenancy by the entirety in the Florida Keys and live there all year. One day...
-
You are the accountant for a newly formed company called Creative Architects Corporation. The following business transactions occurred during the month of May 2018: 1. Received $80,000 from...
-
Calculate It is generally agreed that sales revenue should only be 'realized' and so 'recognized' in the trading, profit and loss account when: a) The sale transaction is for a specific quantity of...
-
Sketch the graph of the function. O No Solution x + 5, x-3 9(x) = 1 2 -x-3, x>-3 -10-9 8765432 + 10 19 8 7 6 5 4 3 2 + 1 2 3 5 6 7 8 10 + -2 -3 + 5 -6 7 8 -10 Help T WebAssign. Graphing Tool 31 Fill
-
Pappa's Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the year, and the inventory count at December 31 are...
-
Determine the number of periods for which the following annuity payments would have to be invested to accumulate to $20,000. Assume payments are made at the end of each period. Convert the number of...
-
Transactions involving the common stock account of Higrade Gas Company during the 2-year period 2011 to 2012 were as follows: 2011 Jan. 1 Had a balance of 200,000 shares of $10 par common stock ....
-
Anakin, Inc., provides the following account balances for 2011 and 2010: Using the format presented in the chapter, prepare the Operating Activities section of the statement of cash flows and present...
-
With reference to Exercise 11.9, (a) find a 95% confidence interval for the mean current density when the strain is \(x=0.50\); (b) find 95% limits of prediction for the current density when a new...
-
Use the expression on page 367, involving deviations from the mean, to calculate \(r\) for the following data: x Y 3 8 6 367 -205
-
If for certain paired data \(n=18\) and \(r=0.44\), test the null hypothesis \(ho=0.30\) against the alternative hypothesis \(ho>0.30\) at the 0.01 level of significance.
Study smarter with the SolutionInn App