a) Entrant Monopolist Fight -10 5 Enter M1 Concede 10 10 Entrant Do nothing Stay out M2 0 20 The monopolist is deciding whether or not to defer the entrant by starting an advertising war. It costs the monopolist X to start the war and will only generate a net benefit of Y if there is entry and the monopolist fights. 1 . What is the minimum value of Y so that the advertisement can be a credible threat? Briefly explain. (3 marks) ii. What is the maximum value of X so that the monopolist has an incentive to start the advertising war? Briefly explain. (3 marks) b. You and your friend are gambling and each of you have two balls: yellow and red. If the colour of the ball picked by you is the same as your friend's, you win. If the colour of the balls from you and your friend are different, your friend wins. Winning with a yellow ball earns a payoff of 80, while winning with a red ball earns a payoff of 60. 1 . Write the 2x2 payoff table for the above game. (4 marks) 11. What is(are) the Nash equilibrium (equilibria), if any, under pure strategies in the above simultaneous game? (2 marks) 111 What is the Nash equilibrium under mixed strategy?

pur-new-sol

Related Questions