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Suppose two competitors, Coa, Inc., and Han,




Question 1.;Suppose two competitors, Coa, Inc., and Han, Inc., are locked in a bitter pricing struggle in the aluminum;industry. In the limit pricing payoff matrix, Coa can choose a given row of outcomes by offering a limit;price ("up") or monopoly price ("down"). Han can choose a given column of outcomes by choosing to;offer a limit price ("left") or monopoly price ("right"). Neither firm can choose which cell of the payoff;matrix to obtain, the payoff for each firm depends upon the pricing strategies of both firms.;Coa;Pricing Strategy;Limit Price;Monopoly Price;Han;Limit Price;$1.5 billion, $3 billion;$1 billion, $4 billion;Monopoly Price;$2.5 billion, $2 billion;$1.75 billion, $3 billion;Coa's payoffs have the red background;And here is the question;Is there a dominant strategy equilibrium in this problem? If so, what is it?;Question 2;A hypothetical monopoly firm is characterized by the following diagram.;a. Assuming that the above firm is a profit maximizer operating in the short run, determine;its optimal price?;b. Determine the firms profit per unit.;c. What is the ATC in dollars?;(see next page please);d. If the above monopolist were to behave like a perfectly competitive firm (operating in;the long run), determine its price;2


Paper#25656 | Written in 18-Jul-2015

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