Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another. Both firms, Big Aluminium Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not. The table below shows payoffs for the firms under various scenarios. The first number in each cell is the payoff of LAG. Suppose the game is played once and each firm has to make its decision simultaneously. Does BAG have a dominant strategy? Explain clearly. Does LAG have a dominant strategy? Explain clearly. Big Aluminium Giant (BAG) Don't Expand Expand 3, 4 4, 2 Little Aluminium Giant Don't Expand 2, 3 Expand 1, 1
Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another. Both firms, Big Aluminium Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not. The table below shows payoffs for the firms under various scenarios. The first number in each cell is the payoff of LAG. Suppose the game is played once and each firm has to make its decision simultaneously. Does BAG have a dominant strategy? Explain clearly. Does LAG have a dominant strategy? Explain clearly. Big Aluminium Giant (BAG) Don't Expand Expand 3, 4 4, 2 Little Aluminium Giant Don't Expand 2, 3 Expand 1, 1
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
Related questions
Question
Transcribed Image Text:Two oligopolistic aluminium manufacturers are engaged in bitter competition with one another. Both firms, Big Aluminium
Giant (BAG) and Little Aluminium Giant (LAG), are deciding whether to expand capacity or not. The table below shows
payoffs for the firms under various scenarios. The first number in each cell is the payoff of LAG.
Suppose the game is played once and each firm has to make its decision simultaneously. Does BAG have a dominant
strategy? Explain clearly. Does LAG have a dominant strategy? Explain clearly.
Big Aluminiumn Giant (BAG)
Don't Expand
Expand
Little Aluminium Giant
Don't Expand
3, 4
2, 3
Expand
4, 2
1, 1
Transcribed Image Text:Suppose a monopolist knows it has two types of customers. The inverse demand for the customers in the first market is P
= 60 - Q while the inverse demand for the customers in the second market is P 50 2Q. The marginal cost is €10 in
both markets. Suppose the firm wishes to charge a two-part tariff to its customers but it cannot distinguish between the
customers in the first and second markets Calculate the entry (fixed) fee that the firm should charge in these
circumstances.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning