Example Game Theory Questions -- solutions guide-1

Suppose that the restaurant industry in Honolulu is monopolistically competitive and is currently in Stage 2 equilibrium (firms currently make zero profit). The graph below shows the cost curves for a typical restaurant in this industry. (a) Draw a demand curve and an MR that is consistent with this market being in Stage 2 equilibrium. (b) Show the equilibrium price Now suppose an highly-infectious new virus comes to the island, causing demand for restanrant meals to shift in. (c) What would you expect this change in restaurant demand when the number of firms is fixed? Explain. (d) What would you expect the change in demand to do to the number of meals sold, prices and profits of firms in the long run if firms can enter and exit? What happens to the mumber of restaurants?

q60c-   Is the Nash equilibrium the best outcome for this problem? Explain

Question 1 iii. “In recent times, we are seeing residential customers demanding higher broadband subscription and speeds which poses a dilemma to pay TV providers.” To what extent is this statement accurate.

The definition of Game Theory is: Game Theory is a field of mathematics that analyzes strategic-interaction between rational, self-interested players. Give an example of a situation that can be considered a game from the perspective of game theory. You can choose this example from your experience or you can consider a hypothetical scenario. Use your own imagination and make sure this is not any famous or known example used in game theory. 1. What is happening in this game? 2. Who are the players in this game? 3. What are the possible actions for each player? 4. Represent the game in normal form with the utilities you have mentioned in the description of the game. 5. Justify the utilities you have assigned. 6. Find the best responses of each player.

a lock-in stategy bundling intertemporal pricing a teaser strategy

Using the information from the previous question, assume that Mytown engages in free trade in the dolls markets with Yourtown, who also faces a market with monopolistic competition. Because of this we can expect that, (a) The numbers of firms operating in this market will not change. (b) At equilibrium the profit of firms will increase. (c) The quantity of types of dolls available to consumers will increase. (d) All the above answers are correct. 2.

QUESTION 8 The table below shows how much the a non-Manchester United fan and a Manchester United fan would pay for an annual subscription to Manchester United TV. The marketing team at Manchester United decides to offer two packages: a basic package that includes all games of the main, youth and women's teams (delayed by one day) and a deluxe package that includes the games (delayed by one day), recording of games from past seasons, and exclusive player interviews. Because there are many more non-Manchester United fans, the marketing team decides to offer the basic package for $30 to attract these fans. What is the maximum price they can charge for the deluxe package if they want Manchester United fans to subscribe to the deluxe package rather than also subscribing to the basic package. Manchester United TV Subscription (annual) Value to a non-Manchester United soccer fan Value to Manchester United fans Basic Package $30 $120 Deluxe Package $40 $200 O 119.99 O 109.99 189.99 O 179 99

a) How many players does this game have? What are the strategies of each player? (b) What are the Nash equilibria of this game? (c) What are the Pareto Efficient outcomes?

4. A model of network externalities. Suppose that there are 50 potential consumers in the market for a new technology that exhibits network effects. There is a uniform distribution of consumers with individual valuations, v, ranging from S1, $2,.., S50. Consumer valuation from consuming the technology is given by vN, where N is the number of consumers adopting the technology. Consumers with purchase the product as long as their valuation is greater or equal to the price, so that the marginal consumer has a valuation such that p3vN. The number of consumers adopting the technology is given by the number of people with valuation greater than y, i.e. N = 50 - v. %3D a) Using the information above, derive the relationship between the price of the product and the number of consumers adopting the product, N. Characterize this relationship – does it reflect a typical market demand curve? b) If the price for the product is $600, find the three equilibrium number of adopters in the market. c)…

What pricing strategy is best for manufacturing smartphones? For instance, skimming pricing strategy or penetration strategy or value based pricing strategy. What is the most appropriate or what is the best to use in manufacturing smart phones.

(a) Compute the Nash Equilibrium in pure strategies of the game above. (b) Compute the subgame perfect Nash equilibrium.(c) Compute the perfect Bayesian euilibrium. (I need help with how to solve these questions in detail)

What are the typical orientation of the markets and audiences for new online media producers?

Sonic Enter Stay Out Dairy Queen (1000, 8000) High Prices, Low Prices (3000, 5000) (-1000, 4000) Consider the entry-deterrence game shown on the game tree above. Use this information to answer the questions #14 and #15. 14. In this situation, Dairy Queen has an incentive to threaten high prices, which would be credible. b. an incentive to threaten low prices, which would be credible. an incentive to threaten high prices, which would be an empty threat. d. an incentive to threaten low prices, which would be an empty threat. а. с. е. no incentive to make a threat. 15. Dairy Queen will receive a payoff of in the SPE of this game. a. $1,000 b. $3,000 c. $4,000 d. $5,000 e. $8,000

Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. Assuming Bieber and Rihanna are rational, what would one expect to happen next?   Question 36 options: a Bieber and Rihanna will determine that it is in each singer's self interest to maintain the agreement. b Bieber and Rihanna will each break the agreement. Both singers' profits will decrease. c Bieber and Rihanna will each break the agreement. Both singers' profits will increase. d Bieber and Rihanna will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase.

Identify a real-world situation in which you see game theory/strategic behavior in action. Explain the game: Who are the players ? What are the strategies they have at their disposal? How are payoffs determined? What, if any, is the Nash equilibrium? Note, this article from Up Journey might help you come up with an example: https://upjourney.com/game-theory-examples-in-real-life

Consider the Salop circular city model with population density S on a circle of unit perimeter. Identical firms equidistantly locate on the circle, each having one location, and produce a physically identical good. Consumers are located uniformly on the circle. Each con- sumer buys exactly one unit of the product, and always chooses the lowest sum of transportation cost and price of the product. The transportation cost is td where d is the distance of travel. Each firm's costs consist of an entry cost f and a marginal cost of pro- duction c. Consider the following two-stage game: In the first stage, potential entrants simultaneously choose whether or not to enter. In the second stage, then entering firms compete in prices. (a) Determine the price level in a symmetric equilibrium of the second-stage subgame. How does the price change with n?

Use the following information to answer questions 1 to 5. A firm is deciding whether or not to enter a new market. The decision tree for the firm is provided below. The prompt below the decision tree explains how the decision tree was created. Enter Do Not Enter Allowed 0.9 Denied 0.1 3 Research No Research Good 0.7 Bad 0.3 5 6 Produce Sell Produce Sell Produce Sell 8 9 10 High 0.75 Low 0.25 High 0.25 Low 0.75 High 0.6 Low 0.4 Profit (5000s) 1200 -800 -200 1200 -800 -200 1400 -600 0 -100 0 At node 1, the firm must decide whether to enter the new market or not. The cost of attempting to enter is $100,000. The upper branch from node 2 shows that the firm has a 0.9 probability of being allowed to enter the market. If the firm is allowed to enter, it will have to pay $1,500,000 to buy the facilities required to become a part of the market. Node 3 shows that the firm will then consider doing a research study to forecast demand for their new product prior to beginning production. The cost of…

A ________ occurs if all players in a game play their best strategies given what their competitors do. a )     Nash equilibrium b )     prisonerʹs dilemma c )     dominant strategy d )     tit‐for‐tat strategy

The global pandemic 2020 has promoted a race to capture the market for introducing effective vaccine and treatments.        a. If PFIZER is the sole vaccine provider given the following information, answer the questions below:                                                                                      Output Price/Unit Total Cost 1 5500 1000 2 5000 1200 3 4500 1500 4 4000 2500 5 3500 4000 6 3000 5700 7 2500 7500 8 2000 9400 9 1500 11400 10 1000 13500   Given the tabular information above find the profit-maximizing output and price also illustrate the same using the two-dimensional labeled diagram. Show the calculation as well.                                                     b. Assume if many firms enter into the business of providing vaccine determine:    How the demand curve of PFIZER would change and how it would now maximize its profit? The kind of market structure now PFIZER…

Game theory terminology Select the term that best describes each definition listed in the following table. Definition Nash Equilibrium Dominant Strategy Collusion Tit-for-tat Strategy Payoff Matrix Prisoners' Dilemma Game A strategy in which a player cooperates until the other player defects and then defects until the other player cooperates again               The event that occurs when agents in a game form an agreement about which strategies to implement               A player's best choice, if it exists, regardless of his or her opponent's strategy               A case in which individually rational behavior leads to a jointly inefficient outcome

Discuss main motivations to use the Nash Equilibrium as a solution concept.

6) The following is a static game D 2,2 0,3 D 3,0 1,1 a) Convert this game into dynamic form game b) Find the Nash equilibrium and subgame perfect Nash equilibrium of this game. c) If you consider this game as dynamic then what kind of dynamic game is this.

Figure: Insulin Prices Suppose a major insulin manufacturer sells in two markets, the U.S.A. and Mexico. If the marginal cost is the same in both markets, to maximize profits, it would charge _______ in the U.S.A. and _________ in Mexico.   Group of answer choices $3700, $600 $50, $50 $3650, $550 $600, 3700

24. Two individuals play the following infinitely repeated prisoner's dilemma game: Player A Cooperate Defect Player B Cooperate 3,5 7,0 Defect 0,6 1, 1 Assume that both players discount future payoffs at rate 8<1. (a) If both players play 'cooperate' every period, then what are their total payoffs?

A trader wants to open a diamond shop in the Singapore area with a choice of the Kembangan, Orchard or Sembawang area. Each'of these area options has a local supplier providing a price quote for the diamond as detailed in the table below. Area Kembangan Orchard Sembawang Questions: a. What is the volume that must be met to get the economic value per area? Determine the volume range for each area. b. Make a crossover chart sketch that describes these conditions c. If in the end the merchant wants to sell as many as 600 cans at a selling price of Rp. 60,000 per can, calculate the profit from each area. Where did the merchant finally determine his location? Fixed cost 5,500,000.00 11,500,000.00 21,500,000.00 Variable cost 55,000.00 35,500.00 15,500.00

Profits for two competing firms depend on the decisions to advertise or not to advertise as follows: If neither firm advertises, each makes a weekly profit of $100. If one firm advertises while the other does not, the firm that advertises makes $120 while the firm that doesn’t advertise makes $60. If both firms advertise, each firm makes $80. (a)  What is the Nash equilibrium? Is this outcome efficient, from the perspective of the two firms? (b)  How does the outcome of the game change if the parties can make a binding agreement in advance about advertising practices? (c)  How does the game change if it is repeated over the course of many weeks (but the firms cannot make a binding agreement about how much advertising they will do)?