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1. Describe the meaning of a Nash Equilibrium when companies are competing with respect to price. Explain why is the equilibrium stable? Why don't the firms raise prices to the level that maximizes joint profits? Also discuss and critique what strategies firms could use to attempt to maximize profits and discuss problems associated with such strategies given the economic and legal environment.
2. Using well explained graphical and verbal analysis, describe the market structure situation confronting professional sports (baseball, football, etc.) labor negotiations and whether you could predict the outcome of those negotiations.
3. Using well developed and thoroughly explained graphical and mathematical relationships, and verbal analysis, demonstrate that a general equilibrium can be achieved under conditions of perfect competition and that under perfect competition economic welfare is maximized. Conclude your analysis by explaining how monopoly would violate the maximization of economic welfare conditions and discuss how far you believe policy should go to try to avoid monopoly and aim for perfect competition. In the answer, discuss whether or not perfect competition is desirable, even though it has the potential for attaining welfare maximization.
Use the given payoff matrix for a simultaneous move one shot game to answer the accompanying questions.
Following is a payoff matrix for Intel and AMD. In each cell, 1st number refers to AMD's profit, while second is Intel's.
In a two player, one shot simultaneous move game each player can select strategy A or B. If both players select strategy A, each receives a payoff of $500.
Company A and B are battling for market share in two separate markets. Market I is worth $30 million in revenue; market II is worth $18 million.
he two leading United State manufacturers of high performance radial tires must set their advertising strategies for coming year. Each company has two strategies available:
Assume you are one of two manufactures of tennis balls. Both you and your competitor have zero marginal costs. Total demand for tennis balls is
Player 1 has the following set of strategies {A1;A2;A3;A4}; player 2’s set of strategies are {B1;B2;B3;B4}. Use the best-response approach to find all Nash equilibria.
Little Kona is a small coffee corporation that is planning entering a market dominated through Big Brew. Each corporation's profit depends on whether Little Kona enters and whether Big Brew sets a high price or a low price.
Suppose that the MBA education industry is constant cost and is in long run equilibrium. Demand raise, but due to strict accreditation standards, new companies are not allowed to enter the market.
Figure 10-13 demonstrate the payoff matrix for the only 2-auto dealerships in a community, Jim's Autos and Tim's Autos. The matrix demonstrate the profits that each company would earn from selecting either a low price or a high price.
Suppose two companies, A and B, that produce super computers. Each can manufacture the next generation super computer for math or for chip research.
Create the strategic form payoff matrix, Determine the Nash equilibrium, Suppose the interaction is sequential where Holland Sweetener chooses to enter
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