Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGr
ID: 1248391 • Letter: C
Question
Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants ignore the health code, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they have to pay workers to do the cleaning.If both restaurants do not clean, each will earn $8,000; alternatively, if they both hire workers to clean, each will earn only $5,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $12,000, and the other restaurant will make only $3,000.
5.3. When the oligopolists (duopolists) expect to compete with each other over an extended period of time, each restaurant chooses to be "nice" and follow a strategy that raises the profits of the other restaurant, expecting the other restaurant to return the favor.
This is an example of:
A. Tacit collusion
B. Perfect competition
C. A non-cooperative Nash equilibrium
D. A prisoners' dilemma
In which type of market do individual firms have no incentive to advertise?
A. Perfect competition
B. Monopolistic competition
C. Oligopoly
D. Monopoly
Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants ignore the health code, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they have to pay workers to do the cleaning.
If both restaurants do not clean, each will earn $8,000; alternatively, if they both hire workers to clean, each will earn only $5,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $12,000, and the other restaurant will make only $3,000.
5.3. When the oligopolists (duopolists) expect to compete with each other over an extended period of time, each restaurant chooses to be "nice" and follow a strategy that raises the profits of the other restaurant, expecting the other restaurant to return the favor.
This is an example of:
A. Tacit collusion
B. Perfect competition
C. A non-cooperative Nash equilibrium
D. A prisoners' dilemma
Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants ignore the health code, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they have to pay workers to do the cleaning.
If both restaurants do not clean, each will earn $8,000; alternatively, if they both hire workers to clean, each will earn only $5,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $12,000, and the other restaurant will make only $3,000.
5.2. If the two restaurants do not collude, what is the Nash equilibrium of this game?
A. All-You-Can-Eat Café cleans, but GoodGrub Diner does not clean.
B. All-You-Can-Eat Café does not clean, but GoodGrub Diner cleans.
C. All-You-Can-Eat Café does not clean, and GoodGrub Diner does not clean.
D. All-You-Can-Eat Café cleans, and GoodGrub Diner cleans.
Consider an economy in which there is initially one firm, HealthyBreakfast, in the market for breakfast cereal. A new firm, TastyCereal, is deciding whether to enter the market, which would change the market to a duopoly.
Assume that HealthyBreakfast can choose to sell its cereal to grocery stores at a high price or a low price. As a monopolist, it can earn $8 million by selling at a high price, or $5 million by selling at a low price. If TastyCereal enters the market and HealthyBreakfast sells at a high price, each firm makes $3 million; however, if TastyCereal enters the market and HealthyBreakfast sells at a low price, each firm loses $1 million.
4.2. Now suppose HealthyBreakfast can sign long-term contracts with grocery stores at a set price before TastyCereal decides whether or not to enter. This game is shown in the following diagram:
In this case, HealthyBreakfast will sign a contract at a ____ price, and TastyCereal _____ enter the market.
A. High; will
B. High; will not
C. Low; will not
D. Low; will
Consider an economy in which there is initially one firm, HealthyBreakfast, in the market for breakfast cereal. A new firm, TastyCereal, is deciding whether to enter the market, which would change the market to a duopoly.
Assume that HealthyBreakfast can choose to sell its cereal to grocery stores at a high price or a low price. As a monopolist, it can earn $8 million by selling at a high price, or $5 million by selling at a low price. If TastyCereal enters the market and HealthyBreakfast sells at a high price, each firm makes $3 million; however, if TastyCereal enters the market and HealthyBreakfast sells at a low price, each firm loses $1 million.
4.1. The following diagram shows this game: TastyCereal first decides whether to enter or not, and then HealthyBreakfast decides whether to sell at a high or low price.
Suppose that HealthyBreakfast can't set long-term contracts with the grocery stores that sell its cereal. HealthyBreakfast issues a press release saying that if TastyCereal enters the market, it will sell at a low price. This _____ a credible threat, and TastyCereal _____ enter the market.
A. Is; will not
B. Is; will
C. Is not; will
D. Is not; will not
The payoff matrix below shows the payoffs for two coffee manufacturers, Cambridge and Greystone, which are deciding whether to advertise. The blue payoffs show Cambridge's profit for different strategies selected by each firm. The orange payoffs show Greystone's profit. For example, if Cambridge advertises and Greystone does not advertise, Cambridge's payoff is $10,000 and Greystone's payoff is $3,000. Consider this a one-shot game; that is, they interact only once and never again.
Greystone
Advertise Not advertise
Cambridge Advertise $5,000 , $5,000 $10,000 , $3,000
Not advertise $3,000 , $10,000 $7,000 , $7,000
3.6. Now suppose that Cambridge and Greystone consider this a repeated game and they expect to interact repeatedly indefinitely.
True or False: If Cambridge and Greystone play this game repeatedly, they are more likely to reach the cooperative outcome.
True or false
Explanation / Answer
Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants ignore the health code, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they have to pay workers to do the cleaning.
If both restaurants do not clean, each will earn $8,000; alternatively, if they both hire workers to clean, each will earn only $5,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $12,000, and the other restaurant will make only $3,000.
5.3. When the oligopolists (duopolists) expect to compete with each other over an extended period of time, each restaurant chooses to be "nice" and follow a strategy that raises the profits of the other restaurant, expecting the other restaurant to return the favor.
This is an example of:
A. Tacit collusion
In which type of market do individual firms have no incentive to advertise?
A. Perfect competition
Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants ignore the health code, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they have to pay workers to do the cleaning.
If both restaurants do not clean, each will earn $8,000; alternatively, if they both hire workers to clean, each will earn only $5,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $12,000, and the other restaurant will make only $3,000.
5.3. When the oligopolists (duopolists) expect to compete with each other over an extended period of time, each restaurant chooses to be "nice" and follow a strategy that raises the profits of the other restaurant, expecting the other restaurant to return the favor.
This is an example of:
A. Tacit collusion
Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants ignore the health code, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they have to pay workers to do the cleaning.
If both restaurants do not clean, each will earn $8,000; alternatively, if they both hire workers to clean, each will earn only $5,000. However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $12,000, and the other restaurant will make only $3,000.
5.2. If the two restaurants do not collude, what is the Nash equilibrium of this game?
C. All-You-Can-Eat Café does not clean, and GoodGrub Diner does not clean.
This is the best strategy which gives each player optium result, there will be no incentive for any of the player to change the strategy.
If one adopts cleaning, the other will follow the same making the proft $5000. Hence they will adopt no clean strategy.
If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute Nash equilibrium.
Consider an economy in which there is initially one firm, HealthyBreakfast, in the market for breakfast cereal. A new firm, TastyCereal, is deciding whether to enter the market, which would change the market to a duopoly.
Assume that HealthyBreakfast can choose to sell its cereal to grocery stores at a high price or a low price. As a monopolist, it can earn $8 million by selling at a high price, or $5 million by selling at a low price. If TastyCereal enters the market and HealthyBreakfast sells at a high price, each firm makes $3 million; however, if TastyCereal enters the market and HealthyBreakfast sells at a low price, each firm loses $1 million.
4.2. Now suppose HealthyBreakfast can sign long-term contracts with grocery stores at a set price before TastyCereal decides whether or not to enter. This game is shown in the following diagram:
In this case, HealthyBreakfast will sign a contract at a ____ price, and TastyCereal _____ enter the market.
C. Low; will not
Consider an economy in which there is initially one firm, HealthyBreakfast, in the market for breakfast cereal. A new firm, TastyCereal, is deciding whether to enter the market, which would change the market to a duopoly.
Assume that HealthyBreakfast can choose to sell its cereal to grocery stores at a high price or a low price. As a monopolist, it can earn $8 million by selling at a high price, or $5 million by selling at a low price. If TastyCereal enters the market and HealthyBreakfast sells at a high price, each firm makes $3 million; however, if TastyCereal enters the market and HealthyBreakfast sells at a low price, each firm loses $1 million.
4.1. The following diagram shows this game: TastyCereal first decides whether to enter or not, and then HealthyBreakfast decides whether to sell at a high or low price.
Suppose that HealthyBreakfast can't set long-term contracts with the grocery stores that sell its cereal. HealthyBreakfast issues a press release saying that if TastyCereal enters the market, it will sell at a low price. This _____ a credible threat, and TastyCereal _____ enter the market.
C. Is not; will
Here the firm cannot set a lower price after Tasty C enters, as it pushes both into losses
The payoff matrix below shows the payoffs for two coffee manufacturers, Cambridge and Greystone, which are deciding whether to advertise. The blue payoffs show Cambridge's profit for different strategies selected by each firm. The orange payoffs show Greystone's profit. For example, if Cambridge advertises and Greystone does not advertise, Cambridge's payoff is $10,000 and Greystone's payoff is $3,000. Consider this a one-shot game; that is, they interact only once and never again.
Greystone
Advertise Not advertise
Cambridge Advertise $5,000 , $5,000 $10,000 , $3,000
Not advertise $3,000 , $10,000 $7,000 , $7,000
This is a case of prisoners dilemma, Payoff matrix should be there ,
Answer will be the fourth quarter, which is right on the right hand and lower side
Cooperate
Defect
Cooperate
win-win
lose more-win more
Defect
win more-lose more
lose-lose
loose -loose is the answer.
3.6. Now suppose that Cambridge and Greystone consider this a repeated game and they expect to interact repeatedly indefinitely.
True or False: If Cambridge and Greystone play this game repeatedly, they are more likely to reach the cooperative outcome.
false
In prisoners dilemma
Generally in these games, the persons paly for self interest, and onece one is harmed because of others strategy, they will continue the same...
This is Grimm trigger or tit for tat strategy may be adopted..
Cooperate
Defect
Cooperate
win-win
lose more-win more
Defect
win more-lose more
lose-lose