Keep the Highest:/3 10. Collusive outcome versus Nash equilibrium Consider a rem
ID: 1144151 • Letter: K
Question
Keep the Highest:/3 10. Collusive outcome versus Nash equilibrium Consider a remote town in which two restaurants, All-You-Can-Eat Café and GoodGrub Diner, operate in a duopoly. Both restaurants disregard health and safety regulations, but they continue to have customers because they are the only restaurants within 80 miles of town. Both restaurants know that if they clean up, they will attract more customers, but this also means that they will have to pay workers to do the cleaning If neither restaurant cleans, each will earn $14,000; alternatively, if they both hire workers to clean, each will earn only $11,000 However, if one cleans and the other doesn't, more customers will choose the cleaner restaurant; the cleaner restaurant will make $18,000, and the other restaurant will make only $6,000 Complete the following payoff matrix using the previous information. (Note: All-You-Can-Eat Café and GoodGrub Diner are both profit-maximizing firms.) GoodGrub Diner Ceans Up Doesn't Clean Up Doesn't Clean Up If All-You-Can-Eat Café and GoodGrub Diner decide to collude, the outcome of this game is as follows: All-You-Can-Eat Café and GoodGrub Diner If both restaurants decide to cheat and behave noncooperatively, the outcome reflecting the unique Nash equilibrium of this game is as follows: All-You-Can-Eat Café and GoodGrub Diner Grade It NowSave&Continue;Explanation / Answer
If All you can eat Cafe and GoodGrub Diner decide to collude, the outcome of this game is as follows: All you can eat Cafe doesn't clean up and GoodGrub Diner doesn't clean up.
If both restaurants decide to cheat and behave non-cooperatively, the outcome reflecting the unique Nash equilibrium of this game is as follows: All you can eat Cafe cleans up and GoodGrub Diner also cleans up. (Dominant strategy solution)
11)
HealthyBran issues a threat:
If TastyCereal decides to enter the market despite the threat, HealthyBran would earn - $ 2 mn if it chose to set a low price, and it would earn $ 2 mn if it chose to set a high price. Therefore, HealthyBran's threat is not credible (it would not price low as it earns a negative profit), and TastyCereal should enter the market.
If HealthyBran decides to sign a contract at a low price, TastyCereal would earn -$2mn if it chose to enter the market, and it would earn $0 mn if it chose to stay out. Therefore, if HealthyBran signed a contract at a low price, TastyCereal would not enter the market, and HealthyBran would earn $4 mn.
On the other hand, if HealthyBran decides to sign a contract at a high price, TastyCereal would earn $2 mn if it chose to enter the market, and it would earn $0 mn if it chose to stay out. Therefore, if HealthyBran signed a contract at a high price, TastyCereal would enter the market, and HealthyBran would earn $2 mn.
GoodGrub Diner Cleans Up Doesn’t Clean Up All you can eat Cafe Cleans Up $11000, $11000 $18000, $6000 Doesn’t Clean Up $6000, $18000 $14000, $14000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.