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After a few years of monopoly, the family that owns the Coca-cola monopoly gets in a fight, and they split the company in two. Now there are two large Coca-cola retailers in your area, and each retailer must decide whether to charge a high or low price. Assume all customers purchase from the firm with the lowest price. if both firms charge the same price, they split the market. The high price is the monopoly price, so at the high price, the full market is worth the same amount as is it is for monopoly (ie. your answer to question 2d). at the low price, the market is worth 60%of the value of the monopoly market.
a) Set up the game as a simultaneous move game
b) Find the Nash equilibrium
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Specify the set of mutually beneficial allocations relative to the initial endowment and illustrate the set.
Explicate which among the policies is most effective and least effective for this nation.
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Assuming that this is rational behaviour by profit-maximizing "firms" elucidate what economic factors may influence such behaviour.
John Wilson, the owner of a fast-food restaurant, estimated that he can sell 1,000 additional hamburgers per day by renting more automated equipment at a cost of $100 per day. Alternatively, he estimated that he could sell an extra 1,200 hamburgers p..
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