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Practice Question: Game Theory

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Wize University Microeconomics Textbook > Oligopoly

Game Theory and Nash Equilibrium

3 Activities

Two firms in a duopoly are trying to decide if they should form a cartel by limiting output so that each can charge a high price along their demand curve and thereby increase their profits. The following payoff matrix shows their payoffs in millions when they cooperate (CO) and when they don’t cooperate.




When firm A cooperates, what is the best strategy for firm A?
More Game Theory and Nash Equilibrium Questions:
Game Theory
Suppose the Canadian live-sports broadcasting industry is a duopoly consisting of TSN and SportsNet. The broadcast rights for NHL games is coming up and both firms must decide how much to bid for NHL broadcasting rights. Each network can submit low-bid or high-bid for the rights. The revenues (in millions) are summarized below.
Practice Question: Game Theory 3
If firms in an oligopoly market are in a Nash equilibrium,
a) Firms will not take into account the strategies of competing firms.
b) Each firm will have its own market price
The main feature of an oligopolistic market is that:
Consider the following game
Two firms, Appl Inc. and Samsoo Inc. can choose to keep price at $800 per smartphone or charge less to capture a larger share of the market.
Their market shares (payoffs) are listed in both cases
Which of the following is incorrect about oligopoly?
Practice Question: Game Theory - Two Nash Equilibria
Numbers listed in the table are payoffs.
Consider the following game
Two firms, Appl Inc. and Samsoo Inc. can choose to keep price at $800 per smartphone or charge less to capture a larger share of the market.
Their market shares (payoffs) are listed in both cases