Exam 17: Oligopoly

In choosing among alternative courses of action, Raj must consider how others might respond to the action he takes. In the language of game theory, we say that Raj must think

Although the practice of predatory pricing is a common claim in antitrust suits, some economists are skeptical of this argument because they believe

Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g., bauxite) market?

Table 17-1 Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The town's weekly demand schedule and total revenue schedule for water is shown in the table below: -Refer to Table 17-1. What is the socially efficient quantity of water?

Table 17-37​ Two restaurants with a focus on Mexican dining operate in Texama. Both Mitch's Mexican and Tim's Tacos need to decide whether to add Zesty Queso or Fresh Guacamole to their menus. The circumstances are that each firm wants to add only one of the two choices on their menu. Below you will find the profits for the stores, shown as: (1) the payoff to Mitch; (2) the payoff to Tim. ​ -​Refer to Table 17-37. Based upon the information from the table, what is the Nash Equilibrium?

Tying involves a firm

In a competitive market, strategic interactions among the firms are not important.

When firms form a cartel in an oligopoly market, the total output is always the same as if the market were perfectly competitive. ​

Table 17-16 This table shows a game played between two players, A and B. The payoffs are given in the table as (Payoff to A, Payoff to B). -Refer to Table 17-16. Which of the following statements is true regarding this game?

Table 17-20 Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie). -Refer to Table 17-20. What is Nadia's dominant strategy?

Table 17-20 Nadia and Maddie are two college roommates who both prefer a clean common space in their dorm room, but neither enjoys cleaning. The roommates must each make a decision to either clean or not clean the dorm room's common space. The payoff table for this situation is provided below, where the higher a player's payoff number, the better off that player is. The payoffs in each cell are shown as (payoff for Nadia, payoff for Maddie). -Refer to Table 17-20. If Maddie chooses to clean, then Nadia will

Figure 17-4. Aaron and Ed are roommates. After a big snowstorm, their driveway needs to be shoveled. Each person has to decide whether to take part in shoveling the driveway. At the end of the day, either the driveway will be shoveled (if one or both roommates take part in shoveling), or it will remain unshoveled (if neither roommate shovels). With happiness measured on a scale of 1 (very unhappy) to 10 (very happy), the possible outcomes are as follows: -Refer to Figure 17-4. The dominant strategy for Ed is to

Suppose two companies own adjacent oil fields. Under the two fields is a common pool of oil worth $60 million. For each well that is drilled, the company that drills the well incurs a cost of $4 million. Each company can drill up to two wells. What is the likely outcome of this game if each company pursues its own self-interest?

If duopoly firms that are not colluding were able to successfully collude, then

​Table 17-36 The information in the table shows the total demand for water service in Takoma. Assume that there are two companies operating in Takoma. Each company that provides these services incurs an annual fixed cost of $400 and that the marginal cost of providing the service to each customer is exactly $2.00. Figures listed are for an annual service contract. ​ -​Refer to Table 17-36. The two water service providers in Takoma are able to form a successful cartel. If they collude on the quantity of service contracts each sells and split the market equally,

In the prisoners' dilemma game, one prisoner is always better off confessing, no matter what the other prisoner does.

Table 17-24 Two firms are considering going out of business and selling their assets. Each considers what happens if the other goes out of business. The payoff matrix below shows the net gain or loss to each firm. -Refer to Table 17-24. Which firm's dominant strategy is to sell?

Game theory is necessary for understanding

Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies. -Refer to Figure 17-2. If this game is played only once, then the most likely outcome is that

Acme Computer Co. sells computers to retail stores for $400. If Acme requires the retailers to charge customers $500 for the computers, then it is engaging in