Question 1:
Many retail stores offer to match or beat the price offered by the rival store. Explain why firms that belong to a cartel might make this offer?
Question 2:
What are the main factors that increase the likelihood of a cartel being successful?
Question 3:
In a Nash-Cournot equilibrium, does an oligopoly firm produce at less than full capacity, at full capacity, or more than full capacity? Please explain.
Question 4:
If firms produce identical products and have the same constant marginal cost, m, explain why the Nash-Bertrand equilibrium price and market quantity are the same regardless of whether there are two or more firms.
Question 5:
In a monopolistically competitive market, the government applies a specific tax of $1 per unit of output. What happens to the profit of a typical firm in this market? Does the number of firms in the market rise or fall? Please explain.
Question 6:
Two firms compete by advertising. Given the payoff matrix to this advertising game, identify each firm's best response to its rival's possible actions. Does either firm have a dominant strategy? What is the Nash equilibrium?
Question 7:
Nicole employs Joshua. She wants him to work hard rather than loaf. She considers offering him a bonus or not giving him one. All else same, Joshua prefers to loaf. If they choose actions simultaneously, what are their strategies?
Question 8:
Given these profits, Firm 2 want to match Firm 1's price, but Firm 1 does not want to match Firm 2's price. Does either firm have a dominant strategy? Does this game have a unique, pure strategy Nash equilibrium? Identify all pure- and mixed-strategy Nash equilibria?
