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When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market, we have
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A Nash equilibrium
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Suppose a market is initially perfectly competitive with many firms selling an identical product. Over time, however, suppose the merging of firms results in the market being served by only three or four firms selling this same product. As a result, we would expect
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A decrease in market output and an increase in the price of the product
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Cartels are difficult to maintain because
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there is always tension between cooperation and self-interest in a cartel.
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Other things the same, in which case is the quantity produced the highest?
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There are a very large number of firms
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In the prisoners dilemma game with Bonnie and Clyde as the players, the likely outcome is
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A bad outcome for both players
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Pursuing its own best interests, Firm A will concede that cigarette smoke causes lung cancer
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None of the above. In pursuing its own best interests, Firm A will in no case concede that cigarette smoke causes lung cancer.
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Pursuing its own best interests, Firm B will concede that cigarette smoke causes lung cancer
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None of the above. In pursuing its own best interests, Firm B will in no case concede that cigarette smoke causes lung cancer.
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If both firms follow a dominant strategy, Firm A's profits (losses) will be
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$-10
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If both firms follow a dominant strategy, Firm B's profits (losses) will be
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$-10
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When this game reaches a Nash equilibrium, profits for Firm A and Firm B will be
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$-10 and $-10, respectively
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Pursuing its own best interests, Farland will impose trade sanctions against U.S. firms
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Regardless of whether the U.S renews MFN status with Farland
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Pursuing its own best interests, the U.S. will renew MFN status with Farland
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None of the above is correct. In pursuing its own best interests, the United States will in no case renew MFN status with Farland.
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This particular game
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All of the above are correct (features a dominant strategy for US and Farland, is a version of the prisoners game)
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If both countries follow a dominant strategy, the value of trade flow benefits for Farland will be
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$75 b
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If both countries follow a dominant strategy, the value of trade flow benefits for the United States will be
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$65 b
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When this game reaches a Nash equilibrium, the value of trade flow benefits will be
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United States $65 b and Farland $75 b
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If trade negotiators are able to communicate effectively about the consequences of various trade policies (i.e., enter into an agreement about the policy they should adopt), then we would expect the countries to agree to which outcome?
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United States $130 b and Farland $275 b
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Assume that trade negotiators meet to discuss trade policy between the United States and Farland. If neither party to the negotiation is able to trust the other party, then
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Each should follow its dominant strategy
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Pursuing its own best interest, Lopes will
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increase the size of its store and parking lot regardless of the decision made by HomeMax
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Pursuing its own best interest, HomeMax will
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Increase the size of its store and parking lot regardless of the decision made by Lopes
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Increasing the size of its store and parking lot is a dominant strategy for
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Both stores
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If both stores follow a dominant strategy, HomeMax's annual profit will grow by
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$1.5 million
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If both stores follow a dominant strategy, Lopes's annual profit will grow by
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$1.0 million
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When this game reaches a Nash equilibrium, annual profit will grow by
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$1.5 million for HomeMax and $1.0 million for Lopes
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Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. They should both agree to
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Refrain from increasing their store and parking lot sizes
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Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. If they both agree to cooperate on a strategy that maximizes their joint profits, annual profit will grow by
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$2.0 million for Lopes and by $2.5 million for HomeMax
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The dominant strategy for ABC is to
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Produce high output, and the dominant strategy for XYZ is to produce high output.
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Which of the following statements is correct?
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Regardless of the strategy pursued by ABC, XYZ's best strategy is to produce a high level of output, and for that reason producing a high level of output is a dominant strategy for XYZ.
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If this game is played only once, then the most likely outcome is that
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both firms produce a high level of output.
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Games that are played more than once generally
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make collusive arrangements easier to enforce.
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