Draw the normal form game layout

Assignment Help Business Economics

Reference no: EM131392143

There are two firms that are considering entering a new market and must make their decision without knowing what the other firm is going to do. Once a decision is made, it becomes a commitment that the firm cannot back out of or change after learning what the other firm will do. Unfortunately, the market is only big enough to support one of the two firms. If both firms enter the market, then they will each lose $10,000. If only one firm enters the market, that firm will earn a profit of $50,000 with the other firm breaking even (i.e., earning $0 profit). Obviously, if neither firm enters the market, neither will earn any profits in that market. Draw the normal form game layout for the above problem and identify any dominant and pure Nash equilibrium solutions as well as any mixed-form Nash equilibrium strategies. If there is a mixed-form Nash equilibrium strategy, state it precisely. Show all work.

Reference no: EM131392143

Questions Cloud

Desire to produce the same amount of output : The Technical Rate of Substitution between factors x2 and x1 is -3. If you desire to produce the same amount of output but cut your use of x1 by 4 units, how many more units of x2 will you need? Explain.

Compete on quantity simultaneously in market : Two competitors A and B compete on quantity simultaneously in a market where demand is described by P = 49 - Q, where Q = A + B. Firm A has production costs C(A) = 17 + 4A + 0.5A^2. Firm B has production costs C(B) = 16 + 5B. What is the Cournot equi..

What is the cournot equilibrium quantity for firm : Cournot Equilibrium I Two competitors A and B compete on quantity simultaneously in a market where demand is described by P = 49 - Q, where Q = A + B. Firm A has production costs C(A) = 17 + 4A + 0.5A^2. Firm B has production costs C(B) = 16 + 5B. Fi..

Flexible as a result of growth in the mandatory programs : Since the 1960's, social security and medicare has grown as portions of US government spending. Has the US budget become more or less flexible as a result of the growth in the mandatory programs.

Draw the normal form game layout : There are two firms that are considering entering a new market and must make their decision without knowing what the other firm is going to do. Once a decision is made, it becomes a commitment that the firm cannot back out of or change after learning..

What will be the market equilibrium price and quantity : The inverse market demand for a good is given by P=34-Q. There are two firms that each sell the same homogeneous good in this market. The marginal cost of production is constant at 4. If these firms compete using the assumptions of the Bertrand model..

How does commercial bank increase the money supply : Discuss possible ways Greece can reduce its high unemployment rate. What are the three functions of money? Which function is the most important? What are the characteristics that something needs to possess in order to function as money? How does a co..

Price elasticity of demand for ice cream is elastic : Stable and predictable prices seem to be valued by retail customers, especially for items that enjoy a high degree of repeat sales. Show that Wal-Mart will sell more than 1000 of the smaller cartons of ice cream if the price elasticity of demand for ..

What is the cause of inflation : What is the cause of inflation? What does inflation do to the purchasing power of money? What are the likely impacts of a congestion tax predicted by economic theory? (could be a zone or other type of congestion tax) How does the most recent unemploy..

User Account

All Pages