3. Consider two firms playing a two-stage game with discount factor 8. In the first stage...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. Consider two firms playing a two-stage game with discount factor 8. In the first stage they play a Cournot quantity setting game where each firm has costs c;(qi) = 10g; for i E {1,2} and the demand is given by p(q) = 100 – q where q = q1 + q2. In the second stage, after the results of the Cournot game are observed, the firms play the following game: Player 2 a Player 1 A 100,100 0,0 В 0,0 300,300 (1) Find the unique Nash equilibrium of the first stage game and the two pure strategy Nash equilibria of the second stage game. (2) As far as the two firms are considered, what are the nmetric Pareto optimal outcomes of each stage game? (3) For which values of 8 can the Pareto optimal outcomes be supported as a subgame perfect equilibrium? (4) Assume that 8 = 0.5. What is the "best" symmetric subgame perfect equilibrium that the players can support? 3. Consider two firms playing a two-stage game with discount factor 8. In the first stage they play a Cournot quantity setting game where each firm has costs c;(qi) = 10g; for i E {1,2} and the demand is given by p(q) = 100 – q where q = q1 + q2. In the second stage, after the results of the Cournot game are observed, the firms play the following game: Player 2 a Player 1 A 100,100 0,0 В 0,0 300,300 (1) Find the unique Nash equilibrium of the first stage game and the two pure strategy Nash equilibria of the second stage game. (2) As far as the two firms are considered, what are the nmetric Pareto optimal outcomes of each stage game? (3) For which values of 8 can the Pareto optimal outcomes be supported as a subgame perfect equilibrium? (4) Assume that 8 = 0.5. What is the "best" symmetric subgame perfect equilibrium that the players can support?
Expert Answer:
Answer rating: 100% (QA)
a In the first stage each player aims to maximize s 100qi qj qi 10q resulting in the optimal response function qi 90qj2 and the unique Nash equilibriu... View the full answer
Related Book For
University Physics with Modern Physics
ISBN: 978-0321501219
12th Edition
Authors: Hugh D. Young, Roger A. Freedman, Lewis Ford
Posted Date:
Students also viewed these economics questions
-
A demand curve is given by p = 450/(x + 8). Find the consumer surplus when the selling price is $10.
-
Demand for microprocessors is given by P = 35 - 5Q, where Q is the quantity of microchips (in millions). The typical firms total cost of producing a chip is Ci = 5qi, where qi is the output of firm...
-
The private demand for drive-in movies is given by P = 20 - 0.1Q. The industry marginal cost of showing drive-in movies is given by MC = 0.1Q. a. Graph the private demand and marginal cost curves,...
-
A chef in a restaurant that specializes in pasta dishes was experiencing difficulty in getting brands of pasta to be al dente-that is, cooked enough so as not to feel starchy or hard but still feel...
-
A particular weight loss company claims that the average weight a person lost after two weeks on its program is 5 lbs. The following data represent the weight loss of 36 randomly selected adults who...
-
Echeverria S.A. is an Argentinian manufacturing company whose total factory overhead costs fluctuate somewhat from year to year, according to the number of machine-hours worked in its production...
-
Coteron, Sanchez, Martinez, and Aracil ("Optimization of the Synthesis of an Analogue of Jojoba Oil Using a Fully Central Composite Design," Canadian Journal of Chemical Engineering, 1993) studied...
-
Economist Lester Thurow once posed the following question: If you were the president of your own country and could choose one of two industries in which to specialize, computer chips or potato chips,...
-
Modify your configuration in Task2 so that the user role is derived from the RADIUS accept message. You will need to add the appropriate Authentication Server Rule for this. Detailed Network...
-
Billingham Packaging is considering expanding its production capacity by purchasing a new machine, the XC-750. The cost of the XC-750 is $2.75 million. Unfortunately, installing this machine will...
-
Briefly describe each of the following financial intermediaries in terms of the way they help issuers raise capital: Commercial Bank : Lending and deposit-taking; also expanded into investment...
-
How is a firms marginal cost curve related to the market supply curve?
-
If the conditions for perfect competition are generally not met, why do economists use the model?
-
List three conditions for perfect competition.
-
Why must buyers and sellers be price takers for a market to be perfectly competitive?
-
Classify the following nudges as either a potentially advantageous default nudge, an information or encouragement nudge, or not a nudge. a. A firm redesigns its health enrollment form so that...
-
A piece of wire 56cm long is cut into two pieces, each to be bent to make a square. The length of a side of one square is to be 2cm longer than the length of a side of the other. How should the wire...
-
Where are the olfactory sensory neurons, and why is that site poorly suited for their job?
-
A small sphere with a mass of 0.002 g and carrying a charge of 5.00 X 10-8 C hangs from a thread near a very large, charged conducting sheet, as shown in Fig. The charge density on the sheet is 2.50...
-
A hot-air balloonist, rising vertically with a constant velocity of magnitude 5.00 m/s, releases a sandbag at an instant when the balloon is 40.0 m above the ground (Fig. 2.41). After it is released,...
-
An Earthlike Planet In January 2006, astronomers reported the discovery of a planet comparable in size to the earth orbiting another star and having a mass of about 5.5 times the earth's mass. It is...
-
Entrepreneurship involves resource gathering, uncertainty, and experimentation. How does this affect the investors?
-
What can and can't we learn from successful start-ups like Pandora's Box and Spotify?
-
What are the main types of investors that fund entrepreneurial ventures?
Study smarter with the SolutionInn App