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In the mid-1990s, Value Jet wanted to enter the market serving routes that would compete head to head with Delta Airlines in Atlanta. Value Jet knew that Delta might respond in one of two ways: Delta could start a price war or it could be "accommodating," keeping the price at a high level. Value Jet had to decide whether it would enter on a small scale or on a large scale. The annual profits (in zillions of dollars) associated with each strategy are summarized in the following table (where the first number is the payoff to Value Jet and the second the payoff to Delta):
a) If Value Jet and Delta choose their strategies simultaneously, what strategies would the two firms choose at the Nash equilibrium, and what would be the payoff for Value Jet? Explain.
b) As it turned out, Value Jet decided to move first, entering on a small scale. It communicated this information by issuing a public statement announcing that it had limited aspirations in this marketplace and had no plans to grow beyond its initial small size. Analyze the sequential game in which Value Jet chooses "small" or "large" in the first stage and then Delta accommodates or starts a price war in the second stage. Did Value Jet enhance its profit by moving first and entering on a small scale? If so, how much more did it earn with this strategy? If not, explain why not? (Hint: Draw the game tree.)
given that an economy;s production function is Y=F(K,L)=K0.3L0.7. Assuming that the depreciation rate is 10%/year. What's the steady state capital per worker, output per worker, and consumption per worker for saving rates
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Your credit union is willing to lend you $32,000 for your home remodeling project. You must sign a home equity loan that requires you to make payments of $395.00 at the end of each month for the next 10 years.
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Suppose that the demand curve for accountants isED=20-W. The supply curve isES=2+2W. a. Graph the demand and supply curves. What is the equilibrium wage and number of accountants hired b. Suppose California taxes accountants $2.
For the first time in two years, Big G (the cereal division of General Mills) raised cereal prices by 2 percent. If, as a result of this price increase, the volume of all cereal sold by Big G dropped by 3 percent, what can you infer about the own ..
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