Construct the game representation in strategic form, where the first element of each pair of payoffs in any of the cells indicates the payoff to firm FB and the second element indicates the payoff to firm SC, that is (FB’s Payoff, SC’s payoff) (5 marks)
Indicate the best responses of each player in the following form: , where is one of the players, say FB, and if the other player, say SC. (5 marks)
Find all dominated strategies, either weakly or strictly dominated,
Express this new game in its extensive form (5 marks)
In this case, with FB moving first and SC second, What equilibrium is more likely to emerge in this game? Use backward induction to find the equilibria, if any. (10 marks)
The firm you work for, Cox tech, is asking you to determine which price should the company set for product x in a new location called market N, where the firm is planning to enter next year. You don’t have data available for the new market, what you have is an estimated utility function for market E where Cox tech is already operating. The estimated utility function for a topical
Finally, both markets have the same supply function: , there are a total of 100 identical consumers in each market E and market N, and the firms are price takers.
To answer the questions below here is a summary of the information, and some questions that will help you clarify what you need to answer:
In market E the utility is . In market N the utility is 20% more than in market E. What is the utility function of consumers in market N?
Both markets face a market supply of , and there are 100 consumers in market E and 100 consumers in market N.
In market E, if consumers consume they still get some utility, how much this is?
In market N if consumers get zero utility, what is different in the utility functions?