2019 Micro Set 2, FRQ #3, Oligopoly
a) Is Jackpot's dominant strategy to close at 6pm or to close at 9pm, or does it have no dominant strategy.
b) Suppose jackpot chooses to close at 6pm and Boulevard chooses no delivery. Is this the profit-maximizing action by Boulevard? Explain using values from pay-off matrix.
c) How much profit will Boulevard earn in the Nash Equilibrium?
Understand that The Nash Equilibrium,, implies that both participants are in their best locations given the other participants choice.
1st - Understand that Jackpot will always close at 6pm = dominate strategy
2nd - Understand that Boulevard will choose to Deliver as that maximizes profit.
Boulevard will Deliver as $30 > $20 - Boulevard's profit is $30 in the Nash Equilibrium
d) Suppose the two companies merge with two locations and the same pay-offs. What strategy would the new company use to maximize its combined profits?
Why?
The payoff with the largest combined profit for two locations.
e)
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