will send spread sheet.
| (a) What are the advantages of the Herfindahl index over concentration ratios in measuring the degree of concentration in an industry? (b) What is the disadvantage of both? |
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| In what way does OPEC resemble a cartel? How successful is it? |
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| Find the Herfindahl index for an industry composed of ( a) three firms— one with 70 percent of the market, and the other two with 20 and 10 percent of the market, respectively; (b) one firm with a 50 percent share of the market and 10 other equal-sized firms; (c) 10 equal- sized firms.
NOTE: Use 70 instead of 70% in your Herfindahl index calculation (p.415) |
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| Starting with the reaction functions of duopolists A and B from Problem 4, find the Cournot solution algebraically
NOTE: The reaction function of duopolist A is |
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| Five Forces and the Airline Industry Examine the U. S. passenger airline industry using the Five Forces. Is this an attractive industry? Why or why not? |
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| How did the 1971 law that banned cigarette advertising on television solve the prisoners’ dilemma for cigarette producers?
NOTE: Explain first the prisoners’ dilemma for cigarette producers before 1971 law. Use table 11-4, replace Low Price with Advertise, and High Price with Don’t Advertise. You would see this is similar to the prisoners’ dilemma |
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| ( a) What is the meaning of tit- for- tat in game theory? ( b) What conditions are usually required for tit- for- tat strategy to be the best strategy? |
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| From the following payoff matrix, where the payoffs are the profits or losses of the two firms, determine (a) whether firm A has a dominant strategy, (b) whether firm B has a dominant strategy, (c) the optimal strategy for each firm, and (d) the Nash equilibrium, if there is one. (Refer to Tables Sheet) |
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| Explain why the payoff matrix in Problem 1 indicates that firms A and B face the prisoners’ dilemma. The problem 1 payoff matrix is as follows: (Refer to Tables Sheet) |
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| Given the following payoff matrix, ( a) indicate the best strategy for each firm. ( b) Why is the entry-deterrent threat by firm A to lower the price not credible to firm B? ( c) What could firm A do to make its threat credible without building excess capacity? (Refer to Tables Sheet)
NOTE: P10(a):The strategies for firm A are low price and high price and the strategies for firm B are enter and don’t enter. What is the best (optimal) strategy for each firm? P10(b) is asking whether firm A would use the low price as a threat if firm B enters? |
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| The following represents the potential outcomes of your first salary negotiation after graduation: Assuming this is a sequential move game with the employer moving first, indicate the most likely outcome. Does the ability to move first give the employer an advantage? If so, how? As the em-ployee, is there anything you could do to realize a higher payoff? |
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| Every year management and labor renegotiate a new employment contract by sending their pro-posals to an arbitrator who chooses the best pro-posal ( effectively giving one side or the other $ 1 million). Each side can choose to hire, or not hire, an expensive labor lawyer ( at a cost of $ 200,000) who is effective at preparing the proposal in the best light. If neither hires lawyers or if both hire lawyers, each side can expect to win about half the time. If only one side hires a lawyer, it can expect to win three- quarters of the time. (a) Diagram this simultaneous move game. (b) What is the Nash Equilibrium of the game? (c) Would the sides want to ban lawyers?
NOTE: Part of the payoff matrix looks like the table on sheet P15-5 |
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