Use the following case from questions 5054 Two ice cream trucks A&B are playing

Question

Use the following case from questions 5054 Two ice cream trucks A&B are playing a simultaneous pricing game. If one of them prices low, he gets all the customers, a payoff of 12, while other gets zero. If both price high they each get a payoff of 6 and if both price low, they get a payoff of 5. Does the Nash equilibrium yield maximum profit? a. No, because they both hate selling ice cream b. No, because they could do better by pricing high c. Yes, because they are both making sales d. Yes, because they are each getting the maximum payoff Q UEST I O N 1 5 3 points Save Answer Use the following case from questions 5054 Two ice cream trucks A&B are playing a simultaneous pricing game. If one of them prices low, he gets all the customers, a payoff of 12, while other gets zero. If both price high they each get a payoff of 6 and if both price low, they get a payoff of 5. What is the best response of Vendor B to Vendor A pricing high? a. Also price high b. Price low c. Leave the market d. All of the above Q UEST I O N 1 6 3 points Save Answer 6/9/2016 Take Test: Week 5 Chapter 15 Quiz – ECO6705OLSU16A https://myhugo.blackboard.com/webapps/assessment/take/launch.jsp?course_assessment_id=_341248_1&course_id=_61277_1&content_id=_3640740_1&ste... 7/13 d. All of the above Use the following case from questions 5054 Two ice cream trucks A&B are playing a simultaneous pricing game. If one of them prices low, he gets all the customers, a payoff of 12, while other gets zero. If both price high they each get a payoff of 6 and if both price low, they get a payoff of 5. If the game is repeated indefinitely, and the vendors adopt a trigger strategy such that they would start charging the low price only if the other vendor charged a low price last time, what would be the Nash equilibrium? a. Vendor A prices high, vendor B prices low b. Both the vendors price low c. Vendor B prices high, vendor A prices low d. Both the vendors price high Q UEST I O N 1 7 3 points Save Answer Use the following setup for the next three questions. Assume a simultaneousmove game. Firm B Low Price High Price Firm A Low Price 10,10 100,2 High Price 2,100 90, 90 What is the best response of firm A, given firm B is charging a High Price? a. Charge a low price b. Charge a high price c. Charge zero, give the good away d. All of the above Q

Explanation / Answer

Only Nash equilibrium point is (low,low).so they could better i.e. maximize profits by selling at higher price.

If vendor A keep high price, best response for B is low price because he gets maximum profit but in case of infinite game this would set price war.

In case of infinity game nash equilibrium would be low,low.

When firm B chose high price , then firm A choose high price in simultaneous game

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