1. When an automaker begins offering low cost financing or rebates, others tend to do the same. What two oligopoly models might offer an explanation of this behavior?
2. Fast-food restaurants tend to cluster together. That is, on one corner, there might be four similar fast-food restaurants. How can this be explained using a location game theory model?
3. Would it ever make sense for a firm to charge a price at or below the cost of the product?
4. McDonald's charges a higher price for a Big Mac in New York City than it does in a small town in Iowa. Is this an example of third-degree price discrimination? Explain.
5. What additional sources of risk come from international investments?