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1). Suppose two competitors, Coa, Inc., and Han, Inc., are

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1). Suppose two competitors, Coa, Inc., and Han, Inc., are locked in a bitter pricing struggle in the aluminum industry. In the limit pricing payoff matrix, Coa can choose a given row of outcomes by offering a limit price ("up") or monopoly price ("down"). Han can choose a given column of outcomes by choosing to offer a limit price ("left") or monopoly price ("right"). Neither firm can choose which cell of the payoff matrix to obtain; the payoff for each firm depends upon the pricing strategies of both firms.

Han


Coa Pricing Strategy Limit Price Monopoly Price
Limit Price $1.5 billion, $3 billion $2.5 billion, $2 billion
Monopoly Price $1 billion, $4 billion $1.75 billion, $3 billion



a. Is there a dominant strategy equilibrium in this problem?
b-If there is a dominant strategy equilibrium, what is it?
c- Is there a Nash equilibrium in this problem?
d-If there is a Nash equilibrium, what is it?
Submitted: 7 years ago.
Category: Homework
Expert:  Joanne replied 7 years ago.

Hello,

 

1. There is a dominant strategy equilibrium in this situation.

Han will play 'Limit price' and Coa will play 'Limit price' as well.

Thus, the dominant strategy equilibrium is $1.5 billion, $3 billion.

 

2. The Nash equilibrium will be the same as the dominant strategy. This, it occurs when both play 'limit price'.

Customer: replied 7 years ago.
Relist: Incomplete answer.
Incomplete answer! other questions are not addressed.
Expert:  Joanne replied 7 years ago.
hello, which questions are not addressed?
Customer: replied 7 years ago.

c- Is there a Nash equilibrium in this problem?

 

d-If there is a Nash equilibrium, what is it?

Expert:  Joanne replied 7 years ago.
THIS ANSWER IS LOCKED!

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