For Professor Ryan

Salvatore’s Chapter 10:

a. Discussion Questions: 2 and 8.

b. Problems: 1 and 5.

Note:

1. P1: Use 70 instead of 70% in your Herfindahl index calculation (p.415)

2. P5: The reaction function of duopolist A is

QA = (12-QB)/2 (1)

The reaction function of duopolist B is

QB = (12-QA)/2 (2)

Find the Cournot solution by substituting equation (1) into equation (2) and solve for QB then QA.

Froeb and McCann's Chapter 10:

1. Individual problems: 10-4.

Salvatore’s Chapter 11:

a. Discussion Questions: 12 and 13.

b. Problems: 2, 6, and 10.

Note:

1. D12: Explain first the prisoners' dilemma for cigarette producers before 1971 law. Use table 11-4, replace Low Price with Advertise, and High Price with Don't Advertise. You would see this is similar to the prisoners' dilemma.

2. P2: Correction: change the payoff cell (21,3) to (-1,3) and (3, 21) to (3,-1).

3. P6: Correction: change the payoff cell (21,3) to (-1,3) and (3,21) to (3,-1) in problem 1.

4. P10(a): Correction: change the payoff cell (3,21) to (3,-1). The strategies for firm A are low price and high price and the strategies for firm B are enter and don't enter. What is the best (optimal) strategy for each firm?

5. P10(b) is asking whether firm A would use the low price as a threat if firm B enters?

Froeb and McCann's Chapter 15:

a. Individual problems: 15-4 and 15-5.

Note:

P15-5: Part of the payoff matrix looks like the following:

Submit this assignment by 11:59 p.m. (ET) on Sunday of Module/Week 5.

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