What is the equilibrium of this game?

What is the equilibrium of this game?

1.)So what is Game Theory and how do businesses uses games? Here is some help from

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In the text, we consider a sequential-move game in which an entrant was considering entering an industry in competition with an incumbent firm (See Figure 15-1). Consider now that the entrant, if fought, has the possibility of withdrawing from the industry (at a loss of 1 for the entrant and a gain of 8 for the incumbent), or staying at a loss of 5 for each player). What is the equilibrium of this game? Discuss if the entrant is better off with or without the ability to withdraw.

2.) Suppose your company runs a shuttle business of a hotel to and from the local airport. The costs for different customer loads are:

1 customer: $30

2 customers: $32

3 customers: $35

4 customers: $38

5 customers: $42

6 customers: $48

7 customers: $57

8 customers: $68.

What are your marginal costs for each customer load level?

Q

TC

MC

Total Rev

Profit

1

30

10

-20

2

32

[a]

20

-12

3

35

[b]

30

-5

4

38

[c]

40

2

5

42

[d]

50

8

6

48

[e]

60

12

7

57

[f]

70

13

8

68

[g]

80

12

3.) Time Warner could offer the History Channel (H) and Showtime (S) individually or as a bundle of both.

Suppose the reservation prices of customers 1 and 2 (the highest prices they are willing to pay) are presented in the boxes below.

The cost to Time Warner is $1 per customer for licensing fees.

Preferences

Showtime

History Chanel

Customer 1

9

2

Customer 2

3

8

Suppose Time Warner could sell Showtime for $9, and History channel for $8, while making Showtime-History bundle available for $13. Should it use mixed bundling. i.e., sells products both separately and as a bundle?

Your answer must include the profit with mixed bundling.

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