FREN 201 Lecture 8: FREN2018Novembre (1)
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7 Feb 2018
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Two firms are considering introducing new Microeconomics textbooks. The market can support only one. The payoff matrix is as follows. (Firm 1's payoff is listed first in
each cell). *For part c, ignore "mixed" or randomized strategies.
Firm 2 Introduce | Firm 2 Don't Introduce | |
Firm 1 Introduce | -10, -10 | 50, 0 |
Firm 1 Dont Introduce | 0, 50 | 0, 0 |
1. What are the cooperative solutions (if any)? Explain.
(Hint: In a "non-cooperative" solution, each party maximizes its own rewards regardless of the results for others. In a "cooperative" solution, the strategies of the participants are coordinated so as to attain the best result for the whole group.)
2. What are the dominant strategies (if any)? Explain.
3. What are the (pure) Nash Equilibria (if any)? Explain.