What is the nash equilibrium of the game

Reference no: EM133704992

Assignment

Task I:

Readings:

Chapter 13. Direct Price Discrimination.
Chapter 14. Indirect Price Discrimination.
Chapter 15. Strategic Games.

Initial Postings: Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.

Also, provide a graduate-level response to each of the following questions:

A. Your family business produces a secret recipe salsa and distributes it through both smaller specialty stores and chain supermarkets. The chains have been demanding sizable discounts but you do not want to drop your prices to the specialty stores. When can you legally accommodate the chains without losing profits from the specialty stores?

Task II:

Activity

A. At a student café, there are equal numbers of two types of customers with the following values. The café owner cannot distinguish between the two types of students because many students without early classes arrive early anyway (i.e., the owner cannot directly price discriminate). The marginal cost of coffee is $0.10. The marginal cost of a banana is $0.40. Is bundling more profitable than selling separately? If so, what price should be charged for the bundle?

	Students with Early Classes	Students without Early Classes
Coffee	$0.70	$0.60
Banana	$0.50	$1.00

B. Every year, management and labor renegotiate a new employment contract by sending their proposals to an arbitrator who chooses the best proposal (effectively giving one side or the other $2 million). Each side can choose to hire, or not hire, an expensive labor lawyer (at a cost of $400,000) who is effective at preparing the proposal in the best light. If neither hires lawyers or if both hire lawyers, each side can expect to win about half the time. If only one side hires a lawyer, it can expect to win three-quarters of the time.

1) Diagram this simultaneous-move game.
2) What is the Nash equilibrium of the game?
3) Would the sides want to ban lawyers?

Reference no: EM133704992

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