1. Game : Price decrease: More Favorable Condition
Apple
No change in price Price: Decrease
(.71, 1.6)
(-.4, 1.9)
(1.3, .2)
(.39, .8)
No change in
Price
Microsoft
Price
Decrease
a. Identify each firm's dominant strategy. Identify the Nash equilibrium.
b. There is a better solution for both companies if they fix the price (co-operative- not independent). Identify that better solution.
2. Explain the three scenarios (profit-loss-shut down) associated with the ATC, AVC benchmarks and the MR=MC criteria in a purely competitive market
3. Why is the Game theory a good model to simulate the oligopoly market? What are the advantages of this game theory approach to understand Oligopoly.