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pexels-kulbir-11079217
pexels-kulbir-11079217
General Instructions The Tampa Tribune and the St. Petersburg Times compete for
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General Instructions The Tampa Tribune and the St. Petersburg Times compete for
General Instructions The Tampa Tribune and the St. Petersburg Times compete for readers in the Tampa Bay market for newspapers. Recently, both newspapers considered changing the prices they charge for their Sunday editions. Suppose they considered the following payoff table for making a simultaneous decision to charge either a low price of $0.50 or a high price of $1.00. Tampa’s profits are shown in regular type. St. Petersburg’s profits are shown in bold. For questions 1 – 10, choose the correct answer to fill in the blanks. Use the suggested words in parentheses after each blank. A detailed explanation must be given to defend each choice. Tampa Tribune Low Price High Price A. B. Low price $120,000 $54,000 St Pete Times $100,000 $120,000 C. D. High Price $90,000 $88,000 $54,000 $90,000 Question #1Question #2Question #3Question #4Question #5Question #6Question #7Question #8Question #9Question #10Question #11 Save Assignment Submitted 1. Tampa Tribune's dominant strategy is ____________ (low price, high price, it has no dominant strategy). 2. St. Petersburg Times' dominant strategy is ____________ (low price, high price, it has no dominant strategy). 3. Tampa Tribune's dominated strategy is ____________ (low price, high price, it has no dominant strategy). 4. St. Petersburg Times' dominated strategy is ____________ (low price, high price, it has no dominant strategy). 5. This newspaper pricing decision ________ (is, is not) a Prisoners' Dilemma. 6. Is there a Nash Equilibrium in this game? If so, which cell(s) is/are the Nash? Is/are the Nash Dominant Strategy Equilibrium? 7. Which cell(s) is/are strategically stable? Use the following game to answer questions 8-10. Be sure to show all of your math step-by-step. Alcoa and Kaiser, duopolists in the market for primary aluminum ingot, choose prices of their 500 foot rolls of sheet aluminum on the first day of the month. The following payoff table shows their monthly payoffs resulting from the pricing decisions they can make. Alcoa High price Low price Kaiser High price A $400, $500 B $175, $575 Low price C $525, $200 D $273, $250 Suppose Alcoa and Kaiser repeat their pricing decision on the first day of every month. Suppose they have been cooperating for the past few months, but now the manager at Kaiser is trying to decide whether to cheat or to continue cooperating. Kaiser’s manager believes Kaiser can get away with cheating for two months, but he also believes that Kaiser would be punished for the next two months after cheating. After punishment, Kaiser’s manager expects the two firms would return to cooperation. Kaiser’s manager ignores the time-value of money and does not discount future benefits or costs. 8. What is the monthly gain to Kaiser from cheating? What is the present value of the benefit from cheating for the two months of cheating? 9. What is the monthly cost of punishment to Kaiser? What is the pres­ent value of the cost of cheating for the two months of punishment? 10. Will Kaiser cooperate or cheat? Explain. 11. Suppose you were asked to manage a golf course that was currently charging a uniform price. Would you suggest that the course continue with this price plan or switch to a two-part pricing plan? Explain your decision and how you would choose the optimal price.

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