Describe a dominant strategy. assuming that the game

Assignment Help Macroeconomics

Reference no: EM133377137

Question 1. Two Italian restaurants A and B, compete by price. Each restaurant can choose either a low price or a high price per dish. Resulting profits (in thousands of dollars) per month are given by the following payoff matrix.

	Restaurant B
		Low Price	High Price
Restaurant A	Low Price	$200 $500	$600 $600
Restaurant A	High Price	$0 $1,100	$400 $1,000

a. Describe a dominant strategy. Assuming that the game described above is a one-shot simultaneous game, does Restaurant A have a dominant strategy in the game? If yes, what is it? Why? If not, why not? (8 pts)

b. Assuming that the game described above is a one-shot simultaneous game, does Restaurant B have a dominant strategy in the game? If yes, what is it? Why? If not, why not? (5 pts)

c. What is the likely outcome, if any, for this pricing game? Explain why. (8 pts)

d. Describe the notion of Nash equilibrium. Is the likely outcome (your answer to part c) a Nash equilibrium? Why or why not. (8 pts)

e. Does the Nash equilibrium outcome maximize the joint profits of the two restaurants? If yes, why? If not, why not? what other strategies maximizes the joint profits of the restaurants? Is it possible for the restaurants to agree to adopt the strategies that result in such outcome? Explain.

Reference no: EM133377137

Questions Cloud

What is the deposit multiplier what is the total decrease : What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

Explain the effectiveness of asset allocation with futures : Explain the effectiveness of Asset allocation with futures with 8 different examples both merits and demerits

What kind of monetary policy should the central bank follow : Suppose an economy is facing an inflationary gap. What kind of monetary policy should the Central Bank follow if it wants to control inflation?

What percent of ownership must be sold to grant : What percent of ownership must be sold to grant the 100% three-year return? b. If the owners want to keep their 1,000,000 shares, how many new shares should

Describe a dominant strategy. assuming that the game : Describe a dominant strategy. Assuming that the game described above is a one-shot simultaneous game, does Restaurant A have a dominant strategy in the game?

Identify metrics to help track each perspective : The first step in using a balanced scorecard is to identify metrics to help track each perspective.

Different training tools used at best buy : What are the advantages and disadvantages of the different training tools used at Best Buy?

Write down and reflect on a situation : Write down and reflect on a situation (either personal or professional) where you have acted on something that is legally permissible, but challenged your value

Calculate the london taxi company gross investment : During 2014 the London Taxi Company bought 4 new cabs for a total of £200,000.£200,000. At the end of 2014 , the market value of all of the cabs was £300,000

User Account

All Pages