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

### Resolved Question:

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: 6 years ago.
Category: Homework
Expert:  Joanne replied 6 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 6 years ago.
Expert:  Joanne replied 6 years ago.
hello, which questions are not addressed?
Customer: replied 6 years ago.

c- Is there a Nash equilibrium in this problem?

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

Expert:  Joanne replied 6 years ago.

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Joanne, Tutor
Category: Homework
Satisfied Customers: 3632
Experience: BSc (Hons) Political Science

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