Answer the 5th question plus 1 more from questions 1–4. Then reply to 1 classmate’s thread.
- A market has only 2 sellers. They are both trying to decide on a pricing strategy. If both firms charge a high price, then each firm will experience a 5% increase in profits. If both firms charge a low price, then each firm will experience a 3% increase in profits. If Firm 1 charges a high price and Firm 2 charges a low price, then Firm 1 will experience a 1% increase in profits and Firm 2 will experience a 6% increase in profits. If Firm 2 charges a high price and Firm 1 charges a low price, then Firm 2 will experience a 2% increase in profits and Firm 1 will experience a 7% increase in profits.
- Construct a payoff matrix for this game.
- Determine whether each firm has a dominant strategy and, if it does, identify the strategy.
- Determine the optimal strategy for each firm.
- Determine the Nash equilibrium. (v) Is this a prisoners’ dilemma? How do you know?
- Why are cartels unstable and why do they often fail?
- What is meant by (a) Zero-sum game? (b) Nonzero-sum game? Provide examples in your discussion.
- How can introducing yearly style changes lead to a prisoners’ dilemma for automakers?
- Respond to the charge that immigrants flood the labor market and drive down wages in the U.S.
- “When a foreigner resides among you in your land, do not mistreat them. The foreigner residing among you must be treated as your native-born. Love them as yourself, for you were foreigners in Egypt. I am the LORD your God” (Leviticus 19:33–34, NIV).
- “There is no evidence that over time, immigrants reduced wages, lowered the living standards of the resident population or raised unemployment rates.” — John Stapleford, Bulls, Bears, and Golden Calves. IVP Academic (p. 227)
Froeb, L. M., McCann, B. T., Ward, M. R., & Shor, M. (2016). Managerial economics: A problem solving approach (4th ed.). Boston, MA: Cengage Learning. ISBN: 9781305259331.
Salvatore, D. (2015). Managerial economics in a global economy (8th ed.). New York, NY: Oxford University Press. ISBN: 9780199397129.