Description of this paper

in the town of South Haven,

Description

solution


Question

in the town of South Haven, there are two petrol stations across the street from each other, the East station and the West station. A local bylaw requires that they are permitted to change the price of petrol only once a week at precisely 8:00 a.m. on Monday and in 5 cent increments. For some time, the price of petrol has been stable at $1.45 per litre, but midweek, the price each station pays for petrol changed to $1.50. In the payoff matrix below the respective payoffs for each station are provided for charging prices of $1.45, $1.50 and $1.55 per litre. The payoffs are written as [East, West].;West;1.45 1.50 1.55;1.45 (-25,-25) (-50,0) (-50, 0);East 1.50 (0, -50) (0, 0) (0, 0);1.55 (0, -50) (0, 0) (25, 25);From the starting point of a price of $1.50 per litre, the stations can either cut price to $1.45 per litre, hold prices at $1.50 per litre, or raise prices to $1.55 per litre.;Given the payoff matrix above, which of the following strategies is a pure strategy Nash equilibrium?;Choose one answer.;a. (hold, hold) and (raise, raise);b. (cut, cut), (hold, hold) and (raise, raise);c. There is no pure strategy Nash equilibrium;d. (cut, cut) and (hold, hold);e (raise, raise)

 

Paper#26982 | Written in 18-Jul-2015

Price : $22
SiteLock