Determine the dominant strategy for sami

Assignment Help Econometrics

Reference no: EM131324766

Suppose that two mining companies, Australian Minerals Company (AMC) and South African Mines, Inc. (SAMI), control the only sources of a rare mineral used in making certain electronic components. The companies have agreed to form a cartel to set the (profit-maximizing) price of the mineral. Each company must decide whether to abide by the agreement (i.e., not offer secret price cuts to customers) or not abide (i.e., offer secret price cuts to customers). If both companies abide by the agreement, AMC will earn an annual profit of $30 million and SAMI will earn an annual profit of $20 million from sales of the mineral. If AMC does not abide and SAMI abides by the agreement, then AMC earns $40 million and SAMI earns $5 million. If SAMI does not abide and AMC abides by the agreement, then AMC earns $10 million and SAMI earns $30 million. If both companies do not abide by the agreement, then AMC earns $15 million and SAMI earns $10 million.

a. Develop a payoff matrix for this decision-making problem.

b. In the absence of a binding and enforceable agreement, determine the dominant strategy for AMC.

c. Determine the dominant strategy for SAMI.

d. If the two firms can enter into a binding and enforceable agreement, determine the strategy that each firm should choose.

Reference no: EM131324766

Questions Cloud

Political issues surrounding human population growth : Do you think there are political issues surrounding human population growth? Why or why not? Can you give an example?

Maintenance of health and the many opportunistic pathogens : Let's discuss the role of the intestinal microbiota in the maintenance of health and the many opportunistic pathogens that cause disease when the delicate balance of normal microbiota in this region of the body is disturbed.

What is the amount of the dividend : DT Motors paid its first annual dividend yesterday in the amount of $4.15 a share. The company plans to increase the dividend at a rate of 20 percent per year for the next 3 years. Thereafter, the dividend is expected to grow at 4 percent per year in..

Rewrite the paper on the given article : Rewrite the paper on the given article.- The Topic for the paper is : "Teaching the Culture of Safety - Nursing".

Determine the dominant strategy for sami : If the two firms can enter into a binding and enforceable agreement, determine the strategy that each firm should choose.

Can engineers hold public welfare paramount : Can engineers hold public welfare paramount?Explain the nature of the problem. Can we approach Engineering as a science? Give pros and cons of your argument. Is there hope that the rights of privacy will survive? Provide an argument that will su..

Respiratory-digestive-urinary and reproductive systems : Focusing on the respiratory, digestive, urinary, and reproductive systems. Create a scenario and give your patient a disease associated with any of these systems and present the history and symptoms of the particular disease below the question.

Find the financial break-even quantity : Consider a project with the following data: accounting break-even quantity = 5,500 units; cash break-even quantity = 5,000 units; life = eight years; fixed costs = $140,000; variable costs = $22 per unit; required return = 12 percent. Ignoring the ef..

Prompt the user to enter two numbers followed by an operator : Prompt the user to enter two numbers followed by an arithmetic operator. Do the specified arithmetic operation and display the result as both an integer and a floating point number, on separate lines.

User Account

All Pages