Market Structure: Oligopoly

Week 6: Market Structure: Oligopoly - Supplemental tangible Analyzing a Game: (Make sure you understand the analysis, it will friend you in answering assignment #3) Suppose two competitors, Coa, Inc., and Han, Inc., argon locked in a bitter price struggle in the aluminium industry. The following is the pricing payoff matrix (in $ jillion): Han CoaPricing stratagemLimit expenditureMonopoly outlay Limit Price$1.5 , $3 $2.5 , $2 Monopoly Price$1 , $4 $1.75 , $3 A.Is there a sovereign intention proportion in this problem? If so, what is it? B. Is there a Nash vestibular sense in this problem? If so, what is it? ANSWERS: A. Yes, there is a governing dodging equilibrium in this problem. Notice that if Han chooses a nail d witness monetary value dodge, Coa abide have $1.5 jillion sooner than $1 billion by also charging a frozentle price. If Han chooses to buck monopoly prices, Coa ass earn $2.5 billion ra ther than $1.75 billion by charging adjust prices. Irrespective of the pricing strategy chosen by Han, Coa is mitigate off charging limit prices. Limit pricing is a dominant strategy for Coa. The same holds true for Han. If Coa chooses to charge limit prices, Han fanny earn $3 billion rather than $2 billion by charging limit prices.

If Coa chooses to charge monopoly prices, Han can earn $4 billion rather than $3 billion by charging limit prices. Irrespective of the pricing strategy chosen by Coa, Han is get around off charging limit prices. Limit pricing is a dominant strategy for Han. Because limit pricing is a do minant strategy for both players, limit pric! ing constitutes a dominant strategy equilibrium. B. In Nash equilibrium, neither firm can improve its let payoff through a one-party change its own strategy. In other words, if there is a set of strategies with the retention that no player can value by changing strategy while the other players stay on their strategies unchanged, then that set of strategies and the corresponding payoffs...If you want to get a full essay, fix it on our website: BestEssayCheap.com

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