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Suppose the Super Wine Co


Suppose the Super Wine Co. and Great Wine Co., two rival wine retailers, are both considering to advertise its brand on TV. The payoffs, in terms of quarterly profits in Smillion, are shown in the table below: Super Wine Co. Don't Advertise Advertise Advertise 5,5 15,3 Great Wine Co. Don't Advertise 3,15 11, 11 (a) Is there a dominant strategy for Super Wine Co. and Great Wine Co.? Explain. (b) What is (are) the Nash equilibrium(s) in the above game? Explain. (c) What is the name of this game? What does this game imply about human cooperation? (d) If both companies expect that they will be in business for an indefinite period, would your prediction in (a) and (b) be different? Explain. Q2. Suppose a manager is considering whether or not to monitor employees, and the workers are considering whether to work or shirk in their workplace. (a) Draw the payoff matrix for this game. Explain whether there is a dominant strategy for manager and worker. (b) What is the name of this game? Does it have any Nash equilibrium? Q3. Explain to the class how the following factors affecting effectiveness of cartels and state the direction of the effect: (a) Number of sellers in the market (b) Extent of sunk costs during initial investment (c) Extent of entry and exit barrier

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