Question 3: There are two pubs: Pub A and Pub B. Each can charge its own price for beer, either $2, $4, or $5. The payoff table below shows the profit earned by each Pub for the different beer price combinations that each charge. There are nine different scenarios. Pub B P = $2 10, 10 12, 14 15, 14 P = $4 14, 12 20, 20 15, 28 P = $5 14, 15 28, 15 25, 25 P= $2 P= $4 P = $5 Pub A Does each pub have a dominant strategy and if so what is it? What is the Nash equilibrium or equilibria (multiple equilibrium)? Show your logic, briefly. a. b.

Question 3: There are two pubs: Pub A and Pub B. Each can charge its own price for beer, either $2, $4, or $5. The payoff table below shows the profit earned by each Pub for the different beer price combinations that each charge. There are nine different scenarios. Pub B P = $2 10, 10 12, 14 15, 14 P = $4 14, 12 20, 20 15, 28 P = $5 14, 15 28, 15 25, 25 P= $2 P= $4 P = $5 Pub A Does each pub have a dominant strategy and if so what is it? What is the Nash equilibrium or equilibria (multiple equilibrium)? Show your logic, briefly. a. b.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter14: Limiting Market Power: Antitrust And Regulation

Section: Chapter Questions

Problem 4DQ

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