1. Assume that two car companies, VW and Toyota, are trying to determine their pricing strategies for their 2021 sedan model. Assume further that the two companies only have two pricing strategies: price Low or price High. Given that the two firms are selling an identical product, if they set the same price then they will split the market equally. Assume that if both firms set high prices, they each make R40 million. By contrast, if both firms set low prices then they each make R20 million. If one firm sets a high price and the other sets a low price, the low price firm captures the entire market and earns R60 million and the high price firm earns RO. Which of the following games best characterises the strategic interaction described above? A. Pure coordination game B. Assurance game C. Battle of the sexes game D. Chicken game E. Prisoners’ Dilemma game
1. Assume that two car companies, VW and Toyota, are trying to determine their pricing strategies for their 2021 sedan model. Assume further that the two companies only have two pricing strategies: price Low or price High. Given that the two firms are selling an identical product, if they set the same price then they will split the market equally. Assume that if both firms set high prices, they each make R40 million. By contrast, if both firms set low prices then they each make R20 million. If one firm sets a high price and the other sets a low price, the low price firm captures the entire market and earns R60 million and the high price firm earns RO. Which of the following games best characterises the strategic interaction described above? A. Pure coordination game B. Assurance game C. Battle of the sexes game D. Chicken game E. Prisoners’ Dilemma game
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![1. Assume that two car companies, VW and Toyota, are trying to determine their pricing strategies
for their 2021 sedan model. Assume further that the two companies only have two pricing
strategies: price Low or price High. Given that the two firms are selling an identical product, if they
set the same price then they will split the market equally. Assume that if both firms set high prices,
they each make R40 million. By contrast, if both firms set low prices then they each make R20
million. If one firm sets a high price and the other sets a low price, the low price firm captures the
entire market and earns R60 million and the high price firm earns RO.
Which of the following games best characterises the strategic interaction described above?
A. Pure coordination game
B. Assurance game
C. Battle of the sexes game
D. Chicken game
E. Prisoners' Dilemma
game](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F03ab2ef3-0627-40b7-8628-cb1ec9bf4356%2Fbcd166e5-44de-4e32-8b27-2f411ddfe307%2Foexpidj_processed.png&w=3840&q=75)
Transcribed Image Text:1. Assume that two car companies, VW and Toyota, are trying to determine their pricing strategies
for their 2021 sedan model. Assume further that the two companies only have two pricing
strategies: price Low or price High. Given that the two firms are selling an identical product, if they
set the same price then they will split the market equally. Assume that if both firms set high prices,
they each make R40 million. By contrast, if both firms set low prices then they each make R20
million. If one firm sets a high price and the other sets a low price, the low price firm captures the
entire market and earns R60 million and the high price firm earns RO.
Which of the following games best characterises the strategic interaction described above?
A. Pure coordination game
B. Assurance game
C. Battle of the sexes game
D. Chicken game
E. Prisoners' Dilemma
game
![8. Which of the following statements regarding zero-sum or constant-sum games are true?
In a zero-sum game, it is possible for both players' payoffs to be positive for any given
strategy pair
In a zero-sum game, any gain experienced by one player entails a loss to the other player
The sum of the payoffs for any given strategy pair in a zero-sum game is always positive and
i.
ii.
iii.
greater than 1
Zero-sum games and constant-sum games have the same game theoretic properties
It is sufficient to show only the first player's payoffs in a game table for a zero-sum game
iv.
V.
A. i and iii
B. ii only
С. iї, iv, andv
D. i, iv, and v
E. All of the above statements are true](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F03ab2ef3-0627-40b7-8628-cb1ec9bf4356%2Fbcd166e5-44de-4e32-8b27-2f411ddfe307%2Foa49gtp_processed.png&w=3840&q=75)
Transcribed Image Text:8. Which of the following statements regarding zero-sum or constant-sum games are true?
In a zero-sum game, it is possible for both players' payoffs to be positive for any given
strategy pair
In a zero-sum game, any gain experienced by one player entails a loss to the other player
The sum of the payoffs for any given strategy pair in a zero-sum game is always positive and
i.
ii.
iii.
greater than 1
Zero-sum games and constant-sum games have the same game theoretic properties
It is sufficient to show only the first player's payoffs in a game table for a zero-sum game
iv.
V.
A. i and iii
B. ii only
С. iї, iv, andv
D. i, iv, and v
E. All of the above statements are true
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