Answer A through D, please! Currently Sam and Carla have the only taxi services in a...

Answer A through D, please!

Currently Sam and Carla have the only taxi services in a small town. Both Sam and Carla are thinking about discounting their respective fares by 20% to attract more business.

The possible outcomes of this game are as follows.

First: Sam offers discounts, while Carla does not, which will result in Sam earning $800 in profit and Carla earning $300 in profit.

Second: Sam and Carla both offer discounts, which will result in Sam earning $200 in profit and Carla earning $500 in profit.

Third: Sam and Carla both do not offer discounts, which will result in Sam earning $600 in profit and Carla earning $700 in profit.

Fourth: Carla offers discounts, while Sam does not, which will result in Sam earning $100 in profit and Carla earning $1,000 in profit.

a) Please construct a payoff matrix for Sam and Carla uses the outcomes above. (You can use the Table Function in Word to create a payoff matrix.)

b) Does Sam have a dominant (optimal) strategy? Please explain your answer.

c) Does Carla have a dominant (optimal) strategy? Please explain your answer.

d) Is there an equilibrium (Nash Equilibrium) solution to this problem where we can predict the strategy of both Sam and Carla? Please explain your reasoning.

Solutions

Expert Solution

a) The game above can be presented in the form of a matrix in the following way:

SAM/CARLA	OFFER DISCOUNT	DO NOT OFFER DISCOUNT
OFFER DISCOUNT	200 , 500	800 , 300
DO NOT OFFER DISCOUNT	100 , 1000	600 , 700

b) If Carla offers discount, then Sam will choose to offer discount as it gives him a higher pay-off of 200 as compared to 100.

If Carla does not offer discount, then Sam will choose to offer discount as it gives him a higher pay-off of 800 as compared to 700.

So, no matter what Carla chooses, Sam always chooses to offer discount, So, Offering discount is the dominant strategy for Sam.

c) If Sam offers discount, then Carla will choose to offer discount as it gives him a higher pay-off of 500 as compared to 300.

If Sam does not offer discount, then Carla will choose to offer discount as it gives him a higher pay-off of 1000 as compared to 700.

No matter what Sam chooses, Carla always chooses to offer discount. So, offering a discount is the dominant strategy for Carla.

d) If Carla offers discount, then Sam will choose to offer discount as it gives him a higher pay-off of 200 as compared to 100.

If Carla does not offer discount, then Sam will choose to offer discount as it gives him a higher pay-off of 800 as compared to 700.

If Sam offers discount, then Carla will choose to offer discount as it gives him a higher pay-off of 500 as compared to 300.

If Sam does not offer discount, then Carla will choose to offer discount as it gives him a higher pay-off of 1000 as compared to 700.

According to the explanation above, (200 , 500) is the nash equilibrium which means that (offer discount , offer discount) is the nash equilibrium.

Rahul Sunny answered 10 months ago

Next > < Previous

Related Solutions

Currently Sam and Carla have the only taxi services in a small town. Both Sam and...

Currently Sam and Carla have the only taxi services in a small town. Both Sam and Carla are thinking about discounting their respective fares by 20% to attract more business. The possible outcomes of this game are as follows. First: Sam offers discounts, while Carla does not, which will result in Sam earning $400 in profit and Carla earning $800 in profit. Second: Sam and Carla both offer discounts, which will result in Sam earning $200 in profit and Carla...

Question 2 Currently Sam and Carla have the only taxi services in a small town. Both...

Question 2 Currently Sam and Carla have the only taxi services in a small town. Both Sam and Carla are thinking about discounting their respective fares by 20% to attract more business. The possible outcomes of this game are as follows. First: Sam offers discounts, while Carla does not, which will result in Sam earning $1000 in profit and Carla earning $800 in profit. Second: Sam and Carla both offer discounts, which will result in Sam earning $600 in profit...

Please answer the questions below: 1. Sam Smith is currently employed as a mechanical engineer and...

Please answer the questions below: 1. Sam Smith is currently employed as a mechanical engineer and is paid $65,000 per year plus benefits that are equal to 30% of his salary. Sam wants to begin a consulting firm and decides to leave his current job. After his first year in business, Sam's accountant informed him that he had made $45,000 with his consulting business. Sam also notices that he paid $6,000 for a health insurance policy, which was his total...

3) Perfectly competitive markets PLEASE DO NOT ANSWER A-D PLEASE ONLY ANSWER E,F,G # of Contraptions...

3) Perfectly competitive markets PLEASE DO NOT ANSWER A-D PLEASE ONLY ANSWER E,F,G # of Contraptions Total Cost 0 500 1 580 2 640 3 690 4 730 5 760 6 800 7 850 8 950 9 1200 10 2000 c) If market price equals $100, how many units should be produced? What is revenue? What is profit? Add these columns to your Table too. d) What is the fixed cost? Would the number of units produced change if the...

Answer only e) to h) problems a) to d) have the answer included Problem 1: Relations...

Answer only e) to h) problems a) to d) have the answer included Problem 1: Relations among Useful Discrete Probability Distributions. A Bernoulli experiment consists of only one trial with two outcomes (success/failure) with probability of success p. The Bernoulli distribution is P (X = k) = pkq1-k, k=0,1 The sum of n independent Bernoulli trials forms a binomial experiment with parameters n and p. The binomial probability distribution provides a simple, easy-to-compute approximation with reasonable accuracy to hypergeometric distribution...

Answer only e) to h) problems a) to d) have the answer included Problem 1: Relations...

Please answer part a) through part d) of the question below. Thank you. Question 3 A...

Please answer part a) through part d) of the question below. Thank you. Question 3 A tobacco refinery has four methods of measuring pH. To test the four methods, a supervisor randomly assigns each of 32 tobacco samples with known pH to one of the four methods, so that each method is applied to exactly eight samples. The difference between measured pH and the known pH is recorded, and the data is below. Method Sample Response A 1 -0.307 A...

I have A B and C answered I only need the answer to D and E....

I have A B and C answered I only need the answer to D and E. I have included the correct answers for A B and C Problem 8-41 (LO. 2, 3, 9) Lori, who is single, purchased 5-year class property for $200,000 and 7-year class property for $400,000 on May 20, 2016. Lori expects the taxable income derived from her business (without regard to the amount expensed under § 179) to be about $800,000. Lori wants to elect immediate...

Please answer ONLY subpart (D) and using solver to solve the question Jane operates a company...

Please answer ONLY subpart (D) and using solver to solve the question Jane operates a company called “Fruity Shop”. It sells apple juice, orange juice and melon juice in boxes. Jane rents a retail space to sell these items and the cost of goods sold (COGS), selling price and daily demand for each item is given in the table below: Description COGS($) Unit Selling Price($) Demand Per Day Apple Juice $ 10.00 $ 14.00 400 Orange Juice $ 12.00 $...

Please answer the following questions: 1.) The Taxi Co. is evaluating a project with the following...

Please answer the following questions: 1.) The Taxi Co. is evaluating a project with the following cash flows: Year:Cash Flow 0:-20,400 1:6100 2:5200 3:7950 4:5400 5:-3700 Should this project be accepted based on the PI if the discount rate is 8 percent? 2.) A firm evaluates all of its projects by applying the IRR rule. If the required return is 18 percent, should the firm accept the following project? Year : Cash Flow 0 : -$105,600 1 : $29,500 2...

Subjects