Deck 14: Oligopoly

Question 1

Mick and Nicky need to decide where to locate their restaurants.They each have to simultaneously choose to locate on State or Main.The payoffs are as follows.If both restaurants are located on Main, each player gets a payoff of 5.If they both choose State, the payoffs are 3 to each player.If Mick locates on State and Nicky on Main, Mick gets a payoff of 7 and Nicky gets 8.If Mick locates on Main and Nicky opts for State, Mick gets 8 and Nicky gets 7.What is the Nash equilibrium?

A)(State, State) where the first strategy is Mick's and Nicky's is the second strategy.
B)(State, Main)
C)(Main, Main) and (State, State)
D)(Main, State) and (State, Main)
E)(Main, State)

Answer 1

(Main, State) and (State, Main)

Question 2

Dell and HP must both simultaneously prices for their new laptops.They can both either choose to set a Low or High price.The payoffs are as follows.If both firms set a Low price, Dell gets 5 and HP 6.If both firms set a High price, the payoffs are 7 to Dell and 8 to HP.If Dell sets a High price and HP chooses Low, the payoffs are 3 to Dell and 10 to HP.If Dell sets a Low price and HP opts for High, the payoffs are 9 to Dell and 1 to H.What is the Nash equilibrium?

A)(Low, High), where the first strategy is Dell's and the second HP's.
B)(High, Low), where the first strategy is Dell's and the second HP's.
C)(High, High), where the first strategy is Dell's and the second HP's.
D)(Low, Low), where the first strategy is Dell's and the second HP's.
E)None of the above.

Answer 2

(Low, Low), where the first strategy is Dell's and the second HP's.

Question 3

Consider an entry game in a particular market.NW Coffee decides whether to Enter or Not Enter a market.If NW Coffee chooses Not Enter it gets a payoff of 10 and Dunkin' Donuts (DDs) gets a payoff of 30.If NW Coffee enters, DDs can choose to either Punish or to Cooperate.If DDs chooses Punish following Enter, the payoffs are 5 to NW Coffee and 25 to DDs.If DDs chooses to Cooperate following Enter, NW Coffee gets a payoff of 20 and DDs gets 20.What are the subgame (credible) equilibria?

A)(Enter, Punish) and (Not Enter, Cooperate).
B)(Enter, Cooperate).
C)(Not Enter, Punish).
D)(Not Enter, Punish) and (Enter, Cooperate).
E)None of the above.

Answer 3

(Not Enter, Punish).

Question 4

Mick and Nicky need to decide where to locate their restaurants.They each have to simultaneously choose to locate on State or Main.The payoffs are as follows.If both restaurants are located on Main, each player gets a payoff of 10.If they both choose State, the payoffs are 5 to each player.If Mick locates on State and Nicky on Main, each player gets a payoff of 2.If Mick locates on Main and Nicky opts for State each player gets 0.What is the Nash equilibrium?

A)(State, State) where the first strategy is Mick's and Nicky's is the second strategy.
B)(State, Main)
C)(Main, Main) and (State, State)
D)(Main, State) and (State, Main)
E)(Main, State)

Question 5

Consider an entry game in a particular market.NW Coffee decides whether to Enter or Not Enter a market.If NW Coffee chooses Not Enter it gets a payoff of 10 and Dunkin' Donuts (DDs) gets a payoff of 30.If NW Coffee enters, DDs can choose to either Punish or to Cooperate.If DDs chooses Punish following Enter, the payoffs are 5 to NW Coffee and 10 to DDs.If DDs chooses to Cooperate following Enter, NW Coffee gets a payoff of 20 and DDs gets 20.What are the Nash equilibria?

A)(Enter, Punish) and (Not Enter, Cooperate).
B)(Enter, Cooperate).
C)(Not Enter, Punish).
D)(Not Enter, Punish) and (Enter, Cooperate).
E)None of the above.

Question 6

Consider the following market in which both Apple and Samsung must choose a new platform for their suite of products.The two choices for each firm are either P1 or P2.The timing of the game is as follows.Apple first chooses either P1 or P2.Samsung observes the choice of Apple and then gets to makes its choice of either P1 or P2.The payoffs are as follows.If both firms chose P1 Apple gets 30 and Samsung 10.If Apple chooses P1 and Samsung P2, Apple receives a payoff of 10 and Samsung gets 0.If Apple opts for P2 and Samsung follows this choice with P1, the payoffs are 50 and 20 to Apple and Samsung, respectively.Finally, if Apple chose P2 and Samsung P2, Apple gets 20 and Samsung gets 10.In the subgame (credible) equilibria, what are the actions we observe in the equilibrium play of the game?

A)(P1, P1) where the first term in the parentheses is Apple's action and the second is the action of Samsung.
B)(P1, P2)
C)(P2, P1)
D)(P2, P2)
E)(P1, P1) and (P2, P2).

Question 7

Consider the following market in which both Apple and Samsung must choose a new platform for their suite of products.The two choices for each firm are either P1 or P2.The timing of the game is as follows.Apple first chooses either P1 or P2.Samsung observes the choice of Apple and then gets to makes its choice of either P1 or P2.The payoffs are as follows.If both firms chose P1 Apple gets 30 and Samsung 10.If Apple chooses P1 and Samsung P2, Apple receives a payoff of 10 and Samsung gets 0.If Apple opts for P2 and Samsung follows this choice with P1, the payoffs are 50 and 10 to Apple and Samsung, respectively.Finally, if Apple chose P2 and Samsung P2, each firm gets 20.In the subgame (credible) equilibria, what are the actions we observe in the equilibrium play of the game?

A)(P1, P1) where the first term in the parentheses is Apple's action and the second is the action of Samsung.
B)(P1, P2)
C)(P2, P1)
D)(P2, P2)
E)(P1, P1) and (P2, P2).

Question 8

Dell and HP must both simultaneously prices for their new laptops.They can both either choose to set a Low or High price.The payoffs are as follows.If both firms set a Low price, Dell gets 3 and HP 7.If both firms set a High price, the payoffs are 6 to Dell and 3 to HP.If Dell sets a High price and HP chooses Low, the payoffs are 8 to Dell and 6 to HP.If Dell sets a Low price and HP opts for High, the payoffs are 7 to Dell and 2 to H.What is the Nash equilibrium?

A)(Low, High), where the first strategy is Dell's and the second HP's.
B)(High, Low), where the first strategy is Dell's and the second HP's.
C)(High, High), where the first strategy is Dell's and the second HP's.
D)(Low, Low), where the first strategy is Dell's and the second HP's.
E)None of the above.

Question 9

Consider an entry game in a particular market.NW Coffee decides whether to Enter or Not Enter a market.If NW Coffee chooses Not Enter it gets a payoff of 10 and Dunkin' Donuts (DDs) gets a payoff of 30.If NW Coffee enters, DDs can choose to either Punish or to Cooperate.If DDs chooses Punish following Enter, the payoffs are 5 to NW Coffee and 10 to DDs.If DDs chooses to Cooperate following Enter, NW Coffee gets a payoff of 20 and DDs gets 20.What are the subgame (credible) equilibria?

A)(Enter, Punish) and (Not Enter, Cooperate).
B)(Enter, Cooperate).
C)(Not Enter, Punish).
D)(Not Enter, Punish) and (Enter, Cooperate).
E)None of the above.

Question 10

Dell and HP must both simultaneously prices for their new laptops.They can both either choose to set a Low or High price.The payoffs are as follows.If both firms set a Low price, Dell gets 5 and HP 6.If both firms set a High price, the payoffs are 7 to Dell and 8 to HP.If Dell sets a High price and HP chooses Low, the payoffs are 3 to Dell and 10 to HP.If Dell sets a Low price and HP opts for High, the payoffs are 9 to Dell and 1 to H.What statement is true?

A)Dell has a dominant strategy, but HP does not have a dominant strategy.
B)The dominant strategy equilibrium is (Low, Low).
C)Each firm has a dominant strategy; this game is a prisoners' dilemma.
D)b and c are true.
E)Neither player has a dominant strategy; this is a prisoner's dilemma.