Game Theory

Explain why oligopolies of undifferentiated goods compete in quantity rather than compete on prices.

- Name one market that can be analyzed with the Hotelling model

- Which model would you use to analyze world crude oil production, justify

- Which model would you use to determine the price of an annual subscription of two streaming services, justify - Suppose a market with two tomato producing companies, which have to decide how much to produce for the following season. Consider that the aggregate demand for tomato is P = 55 - 0.42Q, where P is the price per kilo, Q is the quantity in tons, and the cost per kilo of tomato is $ 5.00 for both producers.

- What is the market price per kilo of tomato?

- What is the market offer for the following season?

- How much are the profits of each producer?

Explain what the assumption of rationality consists.

Alpha and Beta are two rivals in an oligopoly market that choose their prices on the first day of each month. The following table shows the monthly earnings for Alpha and Beta that result from your pricing decisions.

	Beta
	High Price	Low Price
	High Price	A = $200,	A = $50,
Alfa	B = $300	B = $350
	Low Price	A = $300,	A = $75,
	B = $150	B = $200

- Explain if the pricing decision to be made by Alpha and Beta is similar to the Prisoners' Dilemma - What is the Nash equilibrium? - What is the cooperative balance in this game?

The owner of the avocado producer that covers the entire state market, died leaving 50% of the company to each of his two children. Since they do not get along, the brothers decide to separate the capital and workers so that each one can have their own company. Use a Cournot-type collusion model to analyze the decision the siblings have made. Considering that the cost of producing each kilogram is 20 and that the demand function pleases is equal to P = 70-1 / 5Q, where Q is the quantity demanded in tons.

- Set the game strategically and find the Nash equilibrium. - If you were one of the brothers, would you separate the company? (Justify your answer)