9. Use the table below to answer the following questions: Profits in Millions of
ID: 1118084 • Letter: 9
Question
9. Use the table below to answer the following questions: Profits in Millions of Dollars (Firm A's Profit Ta, Firm B's Profit ) Firm B's Price $25 $50 $25 (200, 200]) (400, 100) Firm A's Price $50 (100, 400) (300, 300) a. If firm A charges a price of $25, what price will firm B charge? b. If firm A charges a price of $50, what price will firm B charge? c. Does Firm B have a dominant strategy? d. If firm B charges a price of $25, what price will firm A charge? e. If firm B charges a price of $50, what price will firm A charge? f. Does Firm A have a dominant strategy? g. If the firms do not communicate with each other, how much will each firm charge? h. If the firms collude, how much will each firm charge? i. Is the situation in which both firms charge $25 a Nash equilibrium? Why or why not? j. Is the situation in which both firms charge $50 a Nash equilibrium? Why or why not?Explanation / Answer
A) firm b will choose maximum profit given the price firm A is charging. So if firm A charges 25 USD, firm B will also charge 25 USD
B) going by logic given in point a, firm B will charge 25 USD
C) Yes firm B has a dominant strategy. A dominant strategy is one that chooses the best outcome irrespective of what other players opts for.
D) if firm B charges 25 USD, firm A will also charge 25 USD.
E) if Firm B charges 50 USD, firm A will charge 25 USD.
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