Say whether the following is true or false. Explain it briefly (For a true state

Question

Say whether the following is true or false. Explain it briefly (For a true statement, an explanation is not necessary. For a false statement, no explanation, no credits!) Alec and Kim used to be much better friends than they are now. The problem is what to do about Christmas gifts. If they wait until Christmas morning and move simultaneously, their payoff matrix is: Then, we know that (No, No) is the dominant strategy equilibrium. A leader in the Stackelberg outcome would be worse off if the market changes to a Cournot duopoly.

Explanation / Answer

A)True , no no is a dominant strategy because it increases simultaneous pay off for both alee and kim by offering (6,6 ) endowment .

b)Yes , usually stackelberg model offers a first mover advantage to the first firm which sets quantity and price goals for the second firm . This means the second firm will follow the first and sell a lower output than the first firm due to higher market share .If the market changes into cournot model they will have to produce homogenous products which reduces share for the first firm and enjoy greater market share .

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