Problem sets for Microeconomics II [110051-0471]

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c. Now suppose the town could commit to enforcing the law part of the time. (The typical motorist cannot predict exactly when the town’s traffic police will be monitoring the roadways.) What is the town’s optimal degree (i.e., percentage) of enforcement Explain. Exercise 7.7. In the following game, players A and B alternate moves. At each turn, a player can terminate the game or pass move to the next player. By passing, the player increases the rival’s potential payoff by five units and reduces her own by one unit. Thus, as long as both players pass the move on to one another, their payoffs increase. If the game terminates immediately - the payoff is (2,2). Player A starts the game. a. Draw a game tree for this extensive form game. b. Suppose you are paired with another student with whom you will play the game. Just based on your judgment (no analysis), how would you play c. Now analyze the game tree by working backward. What actions should the players take What is the outcome Briefly explain this result. d. The experiments with the above described game show that many of the players A decides to pass the move. How could you explain this result Exercise 7.8. Over the last decade, the Delta Shuttle and the U.S. Air Shuttle have battled for market share on the Boston – New York and Washington, DC – New York routes. In addition to service quality and dependability (claimed or real), the airlines compete on price via periodic fare changes. The hypothetical payoff table lists each airline’s estimated profit (expressed on a per-seat basis) for various combinations of one-way fares. U.S. Air Shuttle $139 $119 $99 Delta Shuttle $139 34,38 15,42 6,32 $119 42,20 22,22 10,25 $99 35,7 27,9 18,16 a. Suppose that the two airlines select their fares independently and “once and for all.” (The airlines’ fares cannot be changed.) What fares should the airlines set 20
. Suppose, instead, that the airlines will set fares over the next 18 months. In any month, each airline is free to change its fare if it wishes. What pattern of fares would you predict for the airlines over the 18 months c. Pair yourself with another student form the class. The two of you will play the roles of Delta and U.S. Air and set prices for the next 18 months. You will exchange written prices for each month. You then can determine your profit (and your partner’s profit) from the payoff table. The competition continues in this way for 18 months, after which time you should compute your total profit (the sum of your monthly payoffs). Summarize the results of your competition. What lessons can you draw from it 21
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Page 3 and 4: a. If BQ sets the price and weekly
Page 5 and 6: . The chief financial officer appro
Page 7 and 8: . How many fishers will settle at e
Page 9 and 10: Exercise 3.12. Flo is a university
Page 11 and 12: endorse it 90 percent of the time,
Page 13 and 14: 5 Perfect competition and monopoly
Page 15 and 16: a. What is OPEC’s optimal level o
Page 17 and 18: 6 Oligopolistic competition Exercis
Page 19: . In each table, predict the exact

Problem sets for Microeconomics II [110051-0471]

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