2019 Micro Set 1, FRQ # 3, Oligopoly

2019 Micro Set 1, FRQ # 3, Oligopoly

Watch me anser it here

https://youtu.be/l4uEvDLl9Oo

                                             1st - Underline Patricks Pie's numbers 

                                             and square-in Dee's Pizza

                2nd - Do a word chart

a) What actions maximize the combined total profits for Patricks pie and Dee's pizza?

b) Conditional on your answer in part (a), does either Patrick or Dee have an incentive to cheat on this combination of actions that maximize the combined total profits? Explain using numbers from the payoff matrix.

c) Does Patrick have a dominant strategy?

d) Identify the Nash Equilibrium or equilibria actions for this game.

Nash Equilibrium = When neither player has an incentive to change its position

*** If neither player has a dominant strategy 

there can be two Nash Equilibria 

or 

No Nash Equilibria

e) Ignoring anti-trust considerations, suppose that Patrick pays Dees $20 to Stay-Out

i) Redraw the payoff matrix showing how the $20 payment to Dee affects the payoffs.

ii) Identify the Nash Equilibrium